Inflation held steady in May due largely, to rising fuel prices and air and sea fares.
According to figures released by the Office For National Statistics, rising motor fuel prices produced the largest upward contribution to the change in the rate between April and May 2018 but there were also large upward effects from air and sea fares, which rose between April and May this year, which fell between the same two months a year ago.
The Consumer Prices Index including owner occupiers’ housing costs 12-month inflation rate was 2.3% in May 2018, up from 2.2% in April 2018.
Partially offsetting downward effects came from price changes for games, domestic electricity, food and non-alcoholic beverages, and furniture and furnishings.
The report also reveals that house price growth across Great Britain has followed similar trends to London since 2014 but has remained more robust in recent months. Rental price growth has been broadly decreasing since August 2015 with the slowdown driven mainly by the fall in rental price growth in London over the same period.
The slowdown in the rental market likely reflects a combination of supply side and demand side factors.
The Royal Institution of Chartered Surveyors (RICS) April 2018 Residential Market Survey reported that tenant demand in the three months to April 2018 was stagnant. On the supply side, there was a sharp increase in property transactions prior to the introduction of higher Stamp Duty on additional properties in April 2016, with the effect of the increased stock of properties likely taking time to feed through to rental prices.
While the rise in fuel prices was not entirely unexpected, given the increase in oil prices, the lack of building inflationary pressure could mean the planned rate hike by the Bank of England will be put on hold.