UK inflation rate rises to 1.6%

25th January 2017

UK inflation rate rises to 1.6%

Rising air fares and food prices helped to push up UK inflation to its highest rate since July 2014 in December. The annual rate of Consumer Prices Index (CPI) inflation rose to 1.6% last month, up from 1.2% in November, the Office for National Statistics said.

And higher costs for imported materials and fuels pushed up producer prices. Separate producer price inflation figures showed that the price of goods bought from factories rose 2.7% in December compared with a year ago, as manufacturers started to pass on the higher input costs they are facing following the fall in the pound.

The prices paid by factories for raw materials and energy jumped by 15.8% over the year, the largest increase since September 2011. Consumer inflation as measured by the Retail Prices Index (RPI), which includes housing costs, rose to 2.5% in December from 2.2% the previous month.

Air carriers usually push up their fares in December in advance of Christmas and the New Year, so the overall 49% take off in the price of flights this time isn’t a big surprise to statisticians. They track dozens of fares – short-haul, long-haul and domestic – and create a mini-index for each category. And what they tend to detect every year is that discounts creep in in the early months, then prices gain altitude for Easter and the summer before dropping again in the autumn. More ominous is that years of falling food prices appear to be coming to an end. Also worrying is that UK manufacturers are having to pay 16% more for raw materials and fuel, the result of the drop in the pound.

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