June 2023 has proven to be a month of notable shifts in the inflation landscape as observed in the recent Consumer Prices Index including owner occupiers’ housing costs (CPIH) and Consumer Prices Index (CPI) data. However, amid these economic fluctuations, a clear emphasis must be placed on understanding the associated risks, and importantly, the role of council tax.
According to the data released, the CPIH increased by 7.3% in the 12 months to June 2023, a deceleration from the 7.9% growth rate seen in May 2023. This inflation moderation is also mirrored in the monthly CPIH, which rose by 0.2% in June 2023, in contrast to a rise of 0.7% in the same period last year.
On a similar note, the CPI followed suit with an annual rise of 7.9% till June 2023, marking a descent from May’s 8.7% increase. Additionally, the monthly CPI rose marginally by 0.1% in June 2023, a considerable slowdown compared to the 0.8% rise witnessed in June 2022.
The most significant contributors to this downward trend have been the falling prices for motor fuel, which delivered the largest dip in both the CPIH and CPI annual rates. Food prices, although they rose in June 2023, did so at a slower pace than in June 2022, further facilitating the easing in the rates.
It is imperative here to emphasise that this period did not witness any substantial offsetting upward contributions affecting the rate. This cautionary note underscores the potential for such economic conditions to swiftly turn, prompting unexpected inflationary pressures that could affect both consumers and businesses.
Moving into the realm of ‘core’ measures, which exclude volatile elements such as energy, food, alcohol and tobacco, the numbers present a picture of restrained inflation. The core CPIH experienced a rise of 6.4% over the 12 months leading to June 2023, cooling from May’s 30-year peak of 6.5%. Concurrently, the core CPI ascended by 6.9% over the same period, moderating from May’s 7.1% increase, which marked the highest rate since March 1992.
Notably, the core measures continue to demonstrate a divergence between goods and services. The CPIH goods annual rate declined from 9.7% to 8.5%, while the services rate remained static at 6.3%. Similarly, the CPI goods annual rate matched the CPIH’s descent to 8.5%, with the services rate showing a slight reduction from 7.4% to 7.2%.
In such an environment of volatile economic indicators, the role of council tax comes to the fore as a significant and consistent factor affecting consumers’ expenditure and the broader inflation landscape. Historically, council tax has been a relatively stable cost for households, but its impact on overall expenditure and contribution to inflation can be more pronounced in a climate of economic uncertainty.
In conclusion, the shifting CPIH and CPI figures highlight the need for prudence and vigilance in monitoring economic trends. As we navigate these inflationary waters, it is crucial to be mindful of the risks posed by volatile price movements and the crucial role played by less volatile, yet impactful factors like council tax.