Inflation rate rises to 2.9%

19 January 2010

Inflation rate rises to 2.9%

19 January 2010

In the year to December, the consumer prices index, realesed by The Office for National Statistics(CPI) rose by 2.9 per cent, up from 1.9 per cent in November.

In the year to December, the all items retail prices index (RPI) rose by 2.4 per cent, up from 0.3 per cent in November. Over the same period, the all items RPI excluding mortgage interest payments index (RPIX) rose by 3.8 per cent, up from 2.7 per cent in November.

Main contributions to the change in the CPI 12-month rate:

The increase in the CPI annual rate of 1.0 per cent from 1.9 per cent in November to 2.9 per cent in December is the largest ever increase in the annual rate between two months. This record increase is due to a number of exceptional events that took place in December 2008:

- the reduction in the standard rate of Value Added Tax (VAT) to 15 per cent from 17.5 per cent

- sharp falls in the price of oil

- pre-Christmas sales as a result of the economic downturn

These exceptional events led to the CPI falling by 0.4 per cent between November and December 2008 (a record fall between these two months). The CPI increase between November and December 2009 of 0.6 per cent is far more typical (the CPI increased by 0.6 per cent between November and December in both 2006 and 2007).

These exceptional events also affected the change in the RPI annual rate. The largest upward contribution to the change in the CPI annual rate came from transport. Within this division the largest upward effect came from fuels and lubricants where prices rose by 0.2  per cent between November and December this year compared with a fall of 6.2 per cent a year ago.