Inflation Up By 2.9%

The CPI rose by 2.9% in the year to December 2009 from 1.9% in November. The index stood at 112.6 up from 112 in November. It is the largest ever increase. The RPI was up from 216.6 in November to 218 in December or an increase of 2.4% from 0.3% in November. The RPIX (RPI excluding mortgage interest payments) rose by 3.8% from 2.7%.

The record increase in the CPI is largely down to changes that took place in December 2008. The VAT rate was reduced from 17.5% to 15%, there were sharp reductions in the price of oil and the effect of the economic downturn on Christmas sales. The main contributor to the upward trend in the CPI was from transport. Within this category fuels and lubricants rose by 0.2% compared to a 6.2% fall a year ago, the purchase of new cars and air transport. Other significant contributions to the CPI were from clothing and footwear. Retailers reported poor trading caused by the economic downturn. Recreation and culture also made an upward contribution to the CPI from newspapers, books and stationery, AV equipment and accessories and other recreational items such as games toys and hobbies.

Housing and motoring were the most significant upward contributors to the RPI. Mortgage interest payment were the most significant factor within housing in the increase and petrol and fuel the most significant in motoring. Household goods, clothing and footwear, leisure goods, household services and personal goods and services also made significant contributions.