Inflation fallen over 6% since 2023

UK inflation was unchanged at 4% in January, proving economists’ predictions wrong, as food inflation fell by 0.4%

Although no movement was not the best news, the headline figure was down more than 6% compared to January 2023 when it was 10.1%.

The greatest contribution to the static movement came from the price of houses increasing, along with the cost of running them, rising to 2.5% in January from 1.9% in December 2023.

On the positive side, food inflation eased off but utility prices increased with gas up by 6.8% and electricity by 4% in January. However, this was 13% lower than January 2023. The bad news was that current gas and electricity prices were 89% higher than January 2021.

The energy price cap is set to be reduced from April, which should reduce the inflation rate as well as helping hard pressed consumers.

Danni Hewson, head of financial analysis at AJ Bell said: ‘The uptick in the energy price cap had us all rushing to take our meter readings while nursing new year hangovers, but the increase didn’t push up inflation in the way many had expected.’

Food and non-alcoholic drinks fell by 1% from December 2023 to 7%; this was the lowest rate since April 2022 and has dropped for 10 consecutive months. This was small comfort as last March food inflation was at its highest rate for 45 years when it reached 19.2%.

For the month, the price of food and drink fell by 0.4%, while food prices on their own were down by 0.4%, the first monthly drop since September 2021.

Hewson said: ‘The best news for all households came from falling food inflation, with prices actually coming down on a month-by-month basis for the first time in more than two years, a factor which helped offset other cost pressures.’

Lindsay James, investment strategist at Quilter Investors said: ‘Following what had been a period of steadily declining inflation, the data from the ONS reveals the UK saw another pause in the pattern of headline disinflation, with CPI at 4%, the same rate as in December 2023 and still double the Bank of England’s target.

‘Higher gas and electricity prices lead the way as the primary driver of this uptick, with energy prices in January 2024 reported to be 18% lower than at the peak in January 2023, but 89% higher than in January 2021.

‘However, this is in line with prior expectations and with the energy price cap set to decline in April, this should set the stage for headline inflation to decline more substantially in coming months.’

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