Food and beverage prices rose 0.8% MoM (0.11%), owing mainly to a 2.8% increase in meat prices (0.08%). Other upward-pushing items included hotel and restaurant services, up 1.9% (0.09% CPI effect), and other goods and services, up 0.5% (0.04%).
Stubbornly high inflation still on the horizon
Domestic inflation is now at its highest since October 2009. At present, as in the recent past, the housing component and imported goods are the main drivers of the trend. The outlook is for imported inflation and house prices to keep rising in the near term, pushing headline inflation still higher, if our forecast materialises. In our short-term forecast, we project that the CPI will rise by 0.4% in July, 0.6% in August, and 0.4% in September, and that inflation will measure 9.2% in September.
This short-term forecast assumes that house prices will keep rising strongly, albeit not as much as in the June measurement. If they rise more than we have projected, as they indeed did this month, headline inflation will presumably be higher than we have forecast here:
- If house price inflation continues at the rate measured in June, our short-term CPI forecast will increase to 0.6% in July, 0.8% in August, and 0.7% in September, pushing twelve-month inflation up to 9.9% in September.
- By the same token, if the housing market cools off swiftly this summer, inflation will probably be lower than our short-term forecast indicates. For example, if imputed rent rises by 0.5% in coming months, our short-term CPI forecast will decrease to 0.1% in July, 0.4% in August, and 0.2% in September, leaving twelve-month inflation at 8.4% in September.
We think the middle-of-the-road scenario is the most likely to materialise, however, with imputed rent continuing to rise in coming months, but at a slower pace than in June. If the pace does ease, it will take time for the slowdown to affect SI measurements. For its July measurement, SI will calculate house price movements in April, May, and June. It is already clear that prices rose steeply in April and May, and hopefully the summer will be somewhat better. If it is, the shift will start to show as soon as the August measurement.