NIESR underlying inflation hits series high

The National Institute of Economic and Social Research (NIESR) said its measure of underlying inflation, which excludes 5 per cent of the highest and lowest price changes, rose to a new series high of 9.9 per cent in March 2023, up from 9.7 per cent in February¹. The institute published the figures on 19 April 2023¹.

The same release reported that annual consumer price inflation fell from 10.4 per cent in February to 10.1 per cent in March, a fall NIESR attributed largely to price decreases in transport, specifically motor fuels, partially offset by price increases in food and non-alcoholic beverages, as well as recreation and culture¹. NIESR said this marked the seventh consecutive month of double-digit CPI inflation and the twentieth consecutive month that the rate had been above the Bank of England's target¹.

Food inflation rose to an annual rate of 19.1 per cent in March from 18.0 per cent in January, which NIESR described as the highest rate for this category observed in over 45 years¹. The ONS's measure of core inflation, CPI excluding food, energy, alcohol and tobacco, remained flat at 6.2 per cent¹.

NIESR's measure of underlying inflation rose in each of the 12 UK regions, though regional dispersion increased for a second consecutive month. The North of England recorded a trimmed-mean inflation rate of 10.70 per cent in March, while Northern Ireland recorded 8.89 per cent¹.

Source: NIESR¹

Why it matters for households

The headline CPI rate fell, but the measures that strip out volatile prices moved in the opposite direction or stayed flat, which NIESR said suggested the UK had yet to see a meaningful turning point in underlying inflationary pressure¹. For households, the composition of the March figures matters as much as the headline: food and non-alcoholic beverages, recreation and culture, and transport each pulled the index in different directions¹.

NIESR noted that food inflation is concerning because there is no government support to help households offset the cost, and that lower income households, who spend a greater part of their incomes on food, are affected disproportionately¹. The regional figures show the same national rate translating into different pressures depending on where a household lives, with the North of England at 10.70 per cent on the trimmed-mean measure and Northern Ireland at 8.89 per cent¹.

The distinction between headline, core and trimmed-mean measures is set out in our guide to CPI and RPI, and wider inflation and interest rate context sits in the rates and economy section.

What happens next

NIESR said the figures showed inflationary pressures remained persistent, possibly warranting a need for the Monetary Policy Committee to raise rates further next month¹. No further dated steps were reported in the release.