Following a small decline in inflation in the United Kingdom (UK) in November 2023, the Office of National Statistics (ONS) is reporting that inflation for December rose higher than the previous month.
The consumer price index (CPI) rose to 4.0 per cent in December, up from 3.9 per cent in November while the Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose to 4.2 per cent, the same as it did in November.
On a monthly basis, CPIH rose by 0.4 per cent in December 2023, the same rate as in December 2022, while CPI rose by 0.4 per cent in December 2023, the same rate as in December 2022.
The ONS says, “the primary factors influencing the yearly inflation rates for both CPIH and CPI are identical in cases where the measures overlap. Nevertheless, a significant distinction between CPIH and CPI inflation rates arises from the owner occupiers’ housing costs element, which constitutes 16 per cent of CPIH.”
This aspect predominantly contributes to the disparities between the inflation rates of CPIH and CPI, thus establishing CPIH as the most all-encompassing gauge of inflation. In November and December, the CPIH annual inflation rates remained identical.
Food and non-alcoholic beverages category
This stability was influenced by a decline in three divisions with the most significant impact coming from the food and non-alcoholic beverages category.
On the other hand, upward contributions to the inflation rates were observed in five divisions, with alcohol and tobacco being the most notable contributors.
The overall balance of these opposing factors resulted in a consistent inflation rate during this period. Prices in the alcohol and tobacco division rose by 1.2 per cent between November and December 2023, relative to a decline of 1.1 per cent between the same two months a year prior.
Notably, the increase in the annual rate (12.8 per cent) was largely the result of the increase in tobacco duty after the government announced higher taxes in their autumn statement. Food and non-alcoholic beverage prices rose by 0.5 per cent between November and December 2023, relative to a rise of 1.6 per cent a year prior.
The annual rate eased for the ninth consecutive month to 8.0 per cent in December 2023, the lowest since April 2022.
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