United Kingdom inflation jumps in December

Andrew Cummings
January 20, 2021

Stats SA attributed food and non-alcoholic beverages as the main drivers of inflation in December with a monthly increase of 0.5 per cent and an annual rise of 6.0 per cent.

Transport costs contributed 0.11 percentage points to the rate over December, while increasing prices for clothing, and recreation and culture contributed 0.10 percentage points each respectively.

Contribution to Inflation by sector

"Transport costs, including air, sea and coach fares, as well as petrol prices, rose as some travel restrictions eased during parts of the month".

Swathes of the high street were also forced to shut amid tightening coronavirus restrictions just before the holidays. "Compared with November, annual inflation fell in nine Member States, remained stable in eight and rose in ten".

"Together these forces could lift inflation to more than 2pc by the end of the year", said Thomas Pugh, UK economist at Capital Economics.

The Retail Price Index (RPI), a separate measure of inflation, was 1.2% in December, rising from 0.9% the previous month.

Economists expected inflation to hover around the 3% mark.

Allan Monks, UK economist at JPMorgan, predicted that prices will climb "sharply into the spring, led by rising energy inflation and the expiry of the current Value-Added Tax cut from April".

UK Equity fund manager at Premier Miton Investors Jon Hudson said that at 0.8%, the CPIH 12-month rate "remains well below" the Bank of England's 2% target "but given the lockdowns it is unsurprising".

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