Food and furniture costs drive inflation higher

Prices rose in the UK last month, pushed up by higher food prices and more expensive household goods, official figures suggest.

Inflation, as measured by the Consumer Prices Index, rose 0.7% in the 12 months to January, up from December’s 0.6%, the Office for National Statistics said.

The rise was bigger than many economists’ forecasts.

Food and non-alcoholic drinks were a major reason for higher inflation.

They pushed up prices by 0.6%, compared with a fall of 0.1% last time. Premium potato crisps and cauliflowers saw big increases after being discounted in December, the ONS said.

Jonathan Athow, deputy national statistician for economic statistics at the ONS, said household goods prices were also higher because there had been less discounting on items such as bedding or sofas.

But Mr Athow pointed out that January discounting had continued in some form: “However, there were widespread January sales, with particular price cuts for clothing and footwear.”

Statisticians said that clothes prices are typically discounted in December and January for festive shoppers, with a 4.6% fall in costs between December and January.

Another large contributor to rising costs was restaurants and hotels.

Prices in this category were estimated to have risen by 0.9%, largely driven by hotels. Amid the current lockdown restrictions, holiday travel is not allowed in the UK.

UK: Clothes and food price rises push inflation higher

Rises in the cost of clothing and food helped to push UK inflation higher-than-expected last month.

The UK’s inflation rate, which tracks the prices of goods and services, jumped to 0.7% in October from 0.5% in September, official figures show.

Second-hand cars and computer games also saw price rises, but these were partially offset by falls in the cost of energy and holidays.

Analysts had expected the rate to remain flat at 0.5%.

“The rate of inflation increased slightly as clothing prices grew, returning to their normal seasonal pattern after the disruption this year,” said Office for National Statistics deputy statistician Jonathan Athow.

Normally prices for clothes and shoes fall each year between June and July in summer sales before autumn ranges come in, and then rise before sales towards the end of the year, the ONS said.

Throughout 2020 this pattern has been different, with increased discounting in March and April, probably as a response to lockdown, it said. After a small increase in July and August, prices rose by more than a year ago.

What is inflation?

woman shopping

Inflation is the rate at which the prices for goods and services increase.

It affects everything from mortgages to the cost of our shopping and the price of train tickets.

It’s one of the key measures of financial well-being, because it affects what consumers can buy for their money. If there is inflation, money doesn’t go as far.

Food prices rose between September and October, with most of the increase coming in fruit and vegetables, the ONS said.

Analyst firm Capital Economics said food price inflation could continue to rise in November as supermarket demand continues to increase during the Covid-19 lockdown.

cpi inflation

Second-hand car prices also rose in October as people tried to reduce their reliance on public transport.

However, car prices may stabilise and fall back in the middle of 2021 should a vaccine become widely available, according to Samuel Tombs, chief UK economist for Pantheon Macroeconomics.

The largest downward pressure on inflation was caused by a fall in household energy prices.

Gas prices dropped by 12.3% and electricity prices fell 3.2% between September and October.

This was mainly due to energy regulator Ofgem’s latest six month energy price cap, which came into effect on 1 October, the ONS said.