UK inflation is expected to have fallen in June, offering a timely but short-lived boost to Andy Burnham as he prepares to take over as Prime Minister.
The headline Consumer Prices Index rate is forecast to have dropped from 2.8 per cent in May to 2.6 per cent in June, according to several economists.
The latest inflation figures will be published on Wednesday, coinciding with the week the former Mayor of Greater Manchester assumes office.
A significant fall in fuel prices is widely credited as a key driver behind the expected dip in the overall rate.
The RAC said the average price of a litre of diesel at UK forecourts dropped by more than 16p from the start to the end of June, the largest such fall since records began in 2000.
The fuel price decline was triggered by news of an interim ceasefire deal between the US and Iran, which pushed oil prices below pre-crisis levels.
Economists also expect services inflation to have slowed in June, though live music events including Harry Styles and Take That concerts may have pushed prices higher in some areas.
Household energy inflation is similarly expected to have eased last month, though the energy price cap has since risen, with the average annual bill jumping by 13 per cent to £1,862 from the start of July.
Sanjay Raja, chief UK economist for Deutsche Bank, said he expects a “bumpy path” ahead, warning that “the energy disinflation path remains uncertain” and that the “spectre of food price rises remains stark.”
Food inflation slowed from three to 2.2 per cent in May, but industry figures have warned it could jump to as much as 10 per cent this year as rising energy and supply chain costs take effect.
Victoria Scholar, head of investment for Interactive Investor, said: “Inflation is likely to peak at around 3.5 per cent later this year, notably above the 2 per cent target, but relatively under control compared to the inflation spike back in October 2022 during the post-Covid reopening period and Russia’s invasion of Ukraine.”
Tensions in the Middle East have flared again during July, with Brent crude oil prices rising and adding further uncertainty to the near-term inflation outlook.
Analysts at Investec said June’s CPI data “will certainly be one of the highlights” for whoever takes up residence at Number 11, describing it as a busy first week of economic indicators for the incoming chancellor.
Investec added that “May’s rate of 2.8 per cent was less than expected” and forecast a drop to 2.6 per cent, “thanks partly to a fall in petrol prices between May and June.”
Experts have stressed that Burnham’s as-yet-unconfirmed choice of chancellor will be crucial for the longer-term inflation trajectory, as any signals of increased public spending could add upward pressure on prices.
Home secretary Shabana Mahmood is reported to be the frontrunner for the chancellor role, though Burnham has insisted he is yet to make any cabinet appointments.