Consumer Inflation Down To 2% Target

The CPI grew by 2% in the year to December, down from 2.1% in November, due mainly to contributions from the food and non-alcoholic beverages sector and recreational goods and services. Inflationary increases in motor fuels partly offset the downward pressures. Price increases for gas and electricity over the year were slightly more than last year resulting in an upward contribution to inflation. The Bank of England had set a target of 2% for inflation for stability. It is the first time that the CPI has been at 2% since November 2009 (1.9%).

The three main contributors to inflation in recent years have been food and non-alcoholic beverages, housing, water, electricity, gas and other fuels and transport (incl. other fuels). These sectors combined have accounted for more than half of the inflation rate for each month.

CPI Inflation Up To 2.8%

The CPI measure of inflation rose to 2.8% over the year to February 2013 following 4 consecutive months at 2.7%. The largest upward drives came from increases in energy prices and prices of some recreational goods, petrol and air travel. Downward pressure came from small price increases for food and soft drinks and a fall in the price of alcohol compared with the price rises of last year. It follows 4 years of widely fluctuating inflations rates.

The figures mean that a basket of goods that cost £100 in February 2012 would cost £102.80 in February 2013.

The new measure of consumer price inflation, CPIH including owner occupiers’ housing costs, has been launched. The CPIH annual rate is 2.6% in the year to February 2013, up from 2.5% in January.

Additionally, a new Retail Prices Index-based index using a geometric formulation (known as the Jevons formula) has also been launched. The 12-month rate for this index, known as RPIJ, stands at 2.6% in February compared with 2.7% in January.