UK Inflation Rate at 12-Month High

Consumer prices in the United Kingdom increased 0.3 percent year-on-year in January of 2016, following a 0.2 percent rise in the previous month and matching preliminary estimates. It is the highest figure since January of 2015 due to rising housing and utilities cost while prices of food and recreation and culture fell at a slower pace. On a monthly basis, consumer prices declined 0.8 percent, the biggest drop in twelve months.

Year-on-year, the biggest upward pressure came from prices of housing and utilities (up 0.4 percent from 0.3 percent in the previous two months), followed by restaurants and hotels (up 1.6 percent from 1.7 percent in December) and miscellaneous goods and services (up 1.4 percent from 1.1 percent in the previous month). Prices of recreation and culture (-0.1 percent from -0.3 percent in December) and food and non-alcoholic beverages (-2.6 percent from -2.9 percent) fell at a slower pace while the drop in transport cost accelerated (-0.7 percent from -0.2 percent). 

On a monthly basis, the only substantial downward contribution came from air fares prices that fell by 35.8 percent. Air fare prices are highly variable. They typically drop in January following increases in December, with the increase in December 2015 being the largest December rise since 2002. The main upward contributions came from motor fuels and lubricants: overall, prices decreased by 2.6 percent, compared with a larger fall of 6.8 percent a year ago. The largest upward contribution came from prices for petrol which dropped by 1.9 percent compared with a larger fall of 7.3 percent between the same 2 months a year ago. A similar, though less pronounced, effect was seen for diesel, with prices falling by 4.0 percent compared with a fall of 6.0 percent a year ago. Prices of food and non-alcoholic beverages declined 0.6 percent compared with a larger fall of 1.0 percent between the same 2 months a year ago; alcoholic beverages which increased by 5.2 percent compared with an increase of 3.2 percent a year ago; clothing and footwear decreased by 3.4 percent compared with a larger fall of 3.9 percent between the same 2 months a year ago. 

Annual core inflation rate which strips out increases in energy, food, alcohol and tobacco slowed back to 1.2 percent after rising to 1.4 percent in December.

UK Inflation Rate at 12-Month High

ONS | Joana Taborda |
2/16/2016 10:07:58 AM