Inflation in the UK has come in slightly below expectations, with the headline CPI increasing by 2.9 per cent in the 12 months to June 2012. The consensus forecast predicted it would come in at 3.0 per cent. The final count is below the level at which Mark Carney, the new Governor of the Bank of England, would be required to write to George Osborne, which will be a relief in Threadneedle Street, even if it's cutting it a bit fine. But it's also well up from last month's count of 2.7 per cent.
The main drivers increases of the increase were clothing and fuel costs, particularly motor fuels, while the falling costs of air travel added the biggest downward pressure.
The release also saw the introduction of CPIH, a new measure of inflation which includes the housing costs of owner-occupiers. That grew by 2.7 per cent in the last year, and the difference is due "principally to owner occupiers’ housing costs increasing more slowly than overall inflation for other consumer goods and services". That fits with the surprise finding last month that private sector rents aren't rising as fast as we think. The correlation is to be expected, since the rental dataset is only made possible thanks to the information gathered for CPIH.
Hovering in the background of every inflation release these days is the knowledge that real wages are being crushed, and that's no different now. In April, the latest month for which figures are available, wages grew by just 1.3 per cent. In real terms, that's a 1.6 per cent cut. The squeeze continues.