UK inflation steady at target rate

The latest figures from the Office for National Statistics (ONS) indicate that despite increasing energy costs, Consumer Prices Index (CPI) annual inflation is steady at 1.9% for January, just under the Government's target.

The forecast was for inflation to hit 2.1% but the largest upward effect on inflation came from transport. Fuel prices rose this year, with the average price for a litre of ultra-low sulphur petrol up by around 1.7p; last year prices fell by around 3p per litre.

In addition, airfares fell by less than last year, back close to their November levels. This followed a smaller than usual increase in fares in December 2005, particularly on international routes.

According to the ONS there was a further large upward effect due to the cost of fixed landline telephone charges this year. But downward pressure on the CPI annual rate came from furniture and furnishings, where prices fell by more than a year ago, and from miscellaneous goods and services mainly due to financial services, where last year's increases in overdraft fees were not repeated this year, and other miscellaneous services.

Downward pressure came from recreation and culture, in particular games, toys and hobbies and, to a lesser extent, cultural services, major durables for outdoor recreation and package holidays. A large partially offsetting upward effect came from recording media.

Additional downward contributions came from changes in the price of food, in particular vegetables, and from clothing and footwear, with prices for women's and children's outerwear falling by more than a year ago.

Retail Prices Index (RPI) inflation rose in January to 2.4% from 2.2% in December. Upward pressures were similar to the CPI but some downward pressures were less pronounced, particularly the contributions from financial services and other miscellaneous services, which are both lower weighted in the RPI, and furniture where the downward pressure in the CPI was amplified by an increase in the weights.

RPIX inflation - the all items RPI excluding mortgage interest payments - rose to 2.3% in January, from 2.0% in December.

As an internationally comparable measure of inflation, the CPI shows that the UK inflation rate is around the average for the European Union as a whole.

The provisional inflation rate for the enlarged EU 25 in December was 2.1%, compared with the UK figure for the same month of 1.9%.

(SP)