Wednesday 20 January 2021 7:19 am

UK inflation doubles in a month as transport prices rise

UK inflation doubled in December as prices rose during the festive period, the Office for National Statistics has announced.

Prices in the run-up to Christmas were up 0.6 percent compared to a year earlier and rose from 0.3 per cent in November.

Higher prices for transport, recreation and culture were flagged by statisticians, despite food and drink prices falling.

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Responses

Michael Hewson, CMC Markets UK chief analyst, said: “In the UK, inflation has still been fairly benign though core prices have been higher than the more generally used headline number.

“It has also been tougher to track UK inflation in the past 12 months due to the unavailability of some products which are normally used to calculate prices in the inflation basket.

“Nonetheless, price pressures have been subdued with November prices falling back to 0.3 per cent, though core prices are higher at 1.1 per cent.”

Today’s number could see a rise in fees because of higher fuel prices, though weak demand is likely to limit the upside.

In Europe, there is little evidence of rising prices with December numbers showing a decline of 0.3 per cent, which is likely to put pressure on the European Central Bank to guide inflation expectations higher.

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Jon Hudson, UK Equity Fund Manager at Premier Miton Investors, said: “At 0.8 per cent, the inflation rate remains well below target but given the lockdowns it is unsurprising.

“Should the vaccine be successfully rolled out and restrictions reduced, it is likely inflation will pick up in the second half of the year, driven by consumers spending the money they have been unable to over the past year, and higher commodity prices.”

Rachel Winter, Associate Investment Director at Killik & Co, says that unemployment figures will be key in what happens next.

“The next set of unemployment figures will be ones to watch closely,” she said.

“If these continue to shoot up it will further rock consumer confidence, which will likely have a knock-on effect on spending and could wipe out December’s inflation rise.”

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