Marked by an unprecedented slowing of global economic activity, inflation within the Organisation for Economic Co-operation and Development (OECD) dipped to 6.5 per cent in May 2023, the lowest figure since December 2021, according to Consumer Price Index (CPI) measurements. The slowdown, which saw inflation slip from 7.4 per cent in April 2023, was widespread across the OECD, with only the Netherlands, Norway, and the United Kingdom bucking the trend.

In the G7, inflation fell to 4.6 per cent in May 2023, from 5.4 per cent in April. While inflation fell in all G7 countries, core inflation in the United Kingdom showed an increase. Japan and Canada reported the lowest inflation rates within the G7, both under 3.5 per cent. While food and energy inflation contributed significantly to Italy's headline inflation, core inflation was the primary driver in France, Germany, Japan, the UK, and the US.

In the Eurozone, inflation as measured by the Harmonised Index of Consumer Prices (HICP) dropped to 6.1 per cent in May, down from 7.0 per cent in April. A preliminary estimate for June suggests further deceleration in inflation to 5.5 per cent. However, the rate varied significantly among member states, with Germany experiencing inflation at 6.8 per cent while Spain recorded a rate below the 2 per cent monetary policy target.

Year-on-year inflation in the G20 nations also fell, declining to 5.9 per cent in May from 6.5 per cent in April. Outside the OECD, notable decreases in inflation were recorded in Brazil, India, Indonesia, and South Africa, while an increase was seen in Argentina. Inflation rates remained largely stable in China and Saudi Arabia.

Inflation rates varied considerably among OECD countries, with some countries such as Costa Rica, Greece, and Denmark experiencing less than 3 per cent inflation, while others like Hungary and Turkiye reported inflation rates exceeding 20 per cent, OECD said in a press release.

Core inflation, which excludes food and energy, trailed the decline in headline inflation. It fell from 7.1 per cent in April to 6.9 per cent in May. Out of the 33 OECD nations that reported services inflation, 18 recorded a decrease. On average, services inflation retreated to 5.7 per cent in May from 6 per cent in April.

Energy inflation experienced a sharp decline in the OECD, plunging into the negative territory at -5.1 per cent year-on-year in May, down from 0.7 per cent in April. However, countries like Latvia, Italy, the Czech Republic, Colombia, and Hungary still saw energy inflation exceed 10 per cent.