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News : European Last Updated: Jan 15th, 2008 - 16:06:11

UK Annual Consumer Price Inflation held steady in December at 2.1%
By Finfacts Team
Jan 15, 2008, 11:48

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Annual Inflation - Source: UK Office for National Statistics

UK Annual Consumer Price Inflation (CPI) – the UK Government's target measure – was 2.1 per cent in December, unchanged from November.

Large downward contributions to the change in the CPI annual rate came from:

• housing and household services due to gas and electricity bills which increased by less than last year when tariff increases were being phased in: and

• furniture and furnishings where the price of kitchen units fell, reflecting discounting on some lines, and prices increased by less than last December across a range of other furniture

Tesco Plc, the U.K.'s largest retailer, today called for the Bank of England to cut borrowing costs gain after its holiday sales growth missed analyst estimates. The central bank last month reduced the benchmark rate for the first time in two years as the threat to economic growth from higher credit costs outweighed concerns on inflation.

Today's figures are welcome news for the Bank of England but on Monday it was reported that UK factory gate/wholesale price annual inflation for all manufactured products rose to 5.0 per cent - the highest since 1991.

The largest upward contribution to the change in the CPI annual rate was from food and non-alcoholic beverages, particularly cauliflowers, tomatoes, onions and cabbages. Bread and cereals; and sugar, jam, confectionery and chocolate also contributed.

A further upward contribution came from clothing and footwear, mainly due to greater discounting of clothing the previous December across a range of men's and women's clothing. The largest effect came from women's dresses.

There was a small upward contribution from miscellaneous goods and services, chiefly due to an increase in mortgage arrangement fees within financial services.

RPI inflation fell to 4.0 per cent in December, down from 4.3 per cent in November. This was largely due to average mortgage interest payments where there was a smaller increase than last December. Fares and other travel increased, which was due to air fares rising more than they did the previous year. Otherwise the main factors influencing the RPI were similar to those affecting the CPI.

RPIX inflation – the all items RPI excluding mortgage interest payments – was 3.1 per cent in December, down from 3.2 per cent in November.

As an internationally comparable measure of inflation, the CPI shows that the UK inflation rate in November, at 2.1 per cent, was below the provisional figure for the European Union as a whole of 3.1 per cent.

CPI is the consumer prices index. It is the measure adopted by the Government for its UK inflation target. The Bank of England's Monetary Policy Committee is required to achieve a target of 2 per cent. Prior to 10 December 2003, the CPI was published in the UK as the harmonised index of consumer prices (HICP).

RPI is the retail prices index - the uses of the RPI and its derivatives include indexation of pensions, state benefits and index-linked gilts. Inflation is the percentage change in the index compared with the same month one year previously.

© Copyright 2007 by Finfacts.com

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