No change on inflation front...

Whilst stubbornly remaining above the Bank of England’s target level of 2%, which has been the case since November 2009, the UK Consumer Prices Index (CPI) remained at 2.7% in December for the third month in a row.

Figures released by the Office for National Statistics (ONS) cited an increase in both gas and electricity prices as the culprit, with gas rising by 3.9% and electricity by 5.2% compared to the same month in 2011. Also non-alcoholic drink and food prices rose by 3.8%. However, these rises were offset by a fall in air travel costs, down by 6.8%, and motor fuel, which fell by 0.2%.

Commenting on these figures, Phil Gooding, of the ONS was quoted as saying:”By far the largest upward effect comes from domestic gas and electricity. Here we saw the majority of the pre-announced price increases coming into the index for December.”

Responding to the disappointing data, the UK Treasury pointed out that inflation has nearly halved from its recent peak of 5.2% and that the government has helped households by increasing tax-free personal allowances and stopping the planned fuel duty increase that had been expected in January.

Meanwhile, the Retail Prices Index (RPI), which includes housing costs, increased slightly to 3.1% from its previous level of 3%. Compounding the effect this inflation has on the average household, pay growth remains stunted, as this is the fourth year in a row that the growth in pay has remained below the headline inflation rate.

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