Good news as inflation has dropped but what does this really mean. Inflation is a measure of increase the change in prices for goods and services over time so as it has dropped this means that it is no longer increasing at such as high rate as before but as the number is positive, prices are still increasing. Inflation fell to 8.7% in April from 10.1% in March 2023. The rate had peaked at 11.1% in October 2022.

Measures of inflation and prices include consumer price inflation, producer price inflation and the House Price Index.

Inflation measured by consumer price index (CPI) is defined as the change in the prices of a basket of goods and services that are typically purchased by specific groups of households.

The Producer Price Index (PPI) measures the average change over time in the prices domestic producers receive for their output. It is a measure of inflation at the wholesale level that is compiled from thousands of indexes measuring producer prices by industry and product category.

The House Price Index is the annual percentage change for average UK house prices and this was 4.1% in the 12 months to March 2023, compared with 5.8% in the 12 months to February 2023. The average UK house price was £285,000 in March 2023, which is £11,000 higher than 12 months ago, but £8,000 below the recent peak in November 2022.

However, interest rates are expected to increase to 5.5%, to hopefully curb inflation.

The good news is that energy prices are falling.

However, fuel and food prices are quite volatile from year to year.

Remove the volatile elements away from overall inflation and you are left with “core inflation”. This measures of the underlying direction of travel for inflation.

If core inflation is high, overall inflation stays high, and core inflation is high now.

In April, core inflation rose, from 6.2% to 6.8%, the highest level in thirty years.

There is the concern that inflation is becoming embedded in the economy – that households and businesses are beginning to assume prices are going to carry on rising for some time.

It suggests inflation is more of a problem.

The Bank of England will consider this and conclude that its measures to curb inflation is not complete, yet.

The Bank of England want to ensure inflation remains as close as possible to 2%. The Bank will raise interest rates again.

What can we all do? What do we need to watch out for?

In the cost-of-living crisis many people will be struggling financially and this will have an impact on people’s well-being and mental health.

Ask people how they are and listen, help if you can.