UK annual inflation measured at consumer price level was 3.5% in January, increased from 2.9% in December.
The following is an unedited transcript of the news release from the Office for National Statistics.
CPI annual inflation – the Government’s target measure – was 3.5 per cent in January, up from 2.9 per cent in December.
CPI Headlines
Increase in VAT rate leads to record CPI monthly movement for a December to January period. The CPI fell by 0.2 per cent between December and January. Although negative, this is the strongest ever CPI growth between these two months (prices typically fall at a faster rate between December and January). This record monthly movement is mainly due to the increase in January 2010 in the standard rate of Value Added Tax (VAT) to 17.5 per cent from 15 per cent and to a lesser extent the continued increase in oil prices. Official records for the CPI began in 1996.
CPI annual inflation increases again. The CPI annual inflation rate increased again in January. The increase of 0.6 per cent to 3.5 per cent in January from 2.9 per cent in December is the second largest ever increase in the annual rate between two months. This follows a record increase of 1.0 per cent in the annual inflation rate between November and December. The increase in the VAT rate in January 2010 had a significant impact on the change in the CPI annual inflation rate as it led to larger than normal price rises (or prices fell by less than usual) this year for a December to January period. However, the VAT rate between December 2008 and January 2009 was stable at 15 per cent and therefore the VAT rate by itself had no influence on the price movement between these two months last year.
By far the largest upward contribution to the change in CPI annual inflation between December and January came from transport. In transport the largest upward effect to the change came from fuels and lubricants where prices rose this year by 2.2 per cent, which is a record rate of growth for a December to January period compared with a fall of 3.4 per cent a year ago. Increases in the price of crude oil and in the standard rate of VAT both contributed to the significant price rise this year.
Within transport there were also large upward contributions to the change from:
• maintenance and repairs where prices rose across all types of services this year (largely due to the increase in the standard rate of VAT) but fell a year ago
• the purchase of new and second hand cars where, overall, prices rose this year but fell a year ago. The increase in the standard rate of VAT was a factor in the increase in the price of new cars between December and January
Within transport, partially offsetting the upward contributions detailed above was:
• a large downward contribution from air transport where, overall, fares fell by more than a year ago, particularly on long haul routes
• a small downward contribution from sea transport where fares on international routes fell this year but rose a year ago
Highest CPI annual inflation for over a year: the CPI annual inflation rate of 3.5 per cent is the highest it’s been since November 2008 (when it stood at 4.1 per cent).
RPI Headlines
The increase in January 2010 in the standard rate of VAT to 17.5 per cent from 15 per cent and the continued increase in oil prices affected the RPI in a similar way that these factors impacted on the CPI.
Increase in VAT rate leads to highest RPI monthly movement for a December to January period for over 10 years: the RPI was flat between December and January this year, which is the strongest growth for a December to January period since 1997 (when it was also flat). The last time the RPI had positive growth between a December and January was in 1991 when there was an increase of 0.2 per cent.
RPI annual inflation increases again. The RPI annual inflation rate increased again in January. The increase of 1.3 per cent in the RPI annual inflation rate to 3.7 per cent in January from 2.4 per cent in December follows a 2.1 per cent increase in the annual rate between November and December.
By far the largest upward contribution to the change in RPI annual inflation between December and January came from housing: in housing the largest upward effect to the change came from mortgage interest payments which rose this year but fell significantly a year ago when most lenders passed on at least part of the one point decrease when the Bank rate fell from 3.0 per cent to 2.0 per cent. There was also a significant upward effect from house depreciation, which rose this year but fell a year ago; this reflects movements in the Department of Communities and Local Government’s smoothed house price index that is used to calculate this component. Partially offsetting these upward contributions was a small downward contribution from dwelling insurance where premiums rose this year but by less than a year ago.
The Highest RPI annual inflation for over a year. RPI annual inflation of 3.7 per cent is the highest annual rate since October 2008 (when it stood at 4.2 per cent).
RPI annual inflation higher than CPI inflation for the first time in over a year. This is the first month since August 2008 when the RPI annual inflation rate is higher than CPI inflation.
