The imminent release of June's Consumer Prices Index (CPI) inflation figures, due this Wednesday, promises to bring temporary respite from rising living costs to Andy Burnham's incoming administration. Economists forecast a dip in the headline rate of inflation to 2.6 per cent, down from May's 2.8 per cent, potentially offering a brief reprieve for households struggling with increasing expenses.
A sharp decline in petrol and diesel prices has been identified as a key contributor to this anticipated slowdown, with the average price of a litre of diesel plummeting by over 16p since June's beginning, according to motoring services firm RAC. This significant drop is attributed largely to the news of an interim ceasefire agreement between the US and Iran, which led global oil prices below pre-conflict levels.
While services inflation is also expected to have eased in June, regional variations may arise due to events like major music concerts driving up demand. Furthermore, household energy inflation is believed to have taken a step down last month; however, the relief will be short-lived as the increased energy price cap from July pushes the average annual household bill up by 13 per cent to £1,862.
Economists caution against sustained optimism, warning of a "bumpy path" for inflation. Sanjay Raja, chief UK economist at Deutsche Bank, notes that while current oil prices are not at their May peaks, the trajectory for energy disinflation remains uncertain, influenced by ongoing Middle East tensions and rising Brent crude oil prices.
The spectre of food price rises looms large, with industry figures warning of a potential 10 per cent surge in food inflation due to escalating energy and supply chain costs. In the long term, the choices made by the incoming government will significantly impact inflation, with Victoria Scholar, head of investment at Interactive Investor, predicting a peak of 3.5 per cent later this year, above the Bank of England's 2 per cent target.
Experts suggest that Mr Burnham's selection for Chancellor of the Exchequer, yet to be announced, will be critical in determining the UK's inflation outlook. Any signs of increased public spending plans could exacerbate upward pressure on prices, while Home Secretary Shabana Mahmood is reportedly a frontrunner for the role; however, no cabinet appointments have been made by Mr Burnham.