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Inflation falls to 3.6% in January

Consumer Prices Index inflation fell to 3.6% in January, down from 4.2% in December according to figures released by the Office for National Statistics. Retail Prices Index inflation fell to 3.9% from 4.8%.


Inflation falls to 3.6% in January

The consumer price index fell to its lowest level since November 2010, as the 2011 VAT increase fell out of the annual comparison. However, the rate remains well above the Bank of England's 2% target.

While there were small declines in the cost of clothing and footwear, furniture and household goods, the cost of alcohol, household services and health all rose slightly in the month.
In statement the UK treasury said: "Inflation fell significantly in January for the second month in a row, which is good news for family budgets. The Bank of England and other forecasters expect inflation to keep falling through this year, providing additional relief." 

Reacting to the news, the British Retail Consortium said that the slowdown would help ease the squeeze on household budgets but still left overall costs rising faster than wages. It also pointed out that this made the 5.6% Business Rates rise, planned for April, even harder to justify.

British Retail Consortium director general Stephen Robertson said: "On its own this isn't going to produce the substantial revival in consumer confidence which retailers and the economy desperately need. But the fall is good news for hard-pressed families who've faced uncomfortably high levels of inflation over the past couple of years.

"Last year's VAT increase has now fallen out of annual comparisons. That's a major reason for the drop but retailers' discounts and promotions and falls in a number of world commodity prices are also helping. The official rate is now at its lowest for over a year and moving in the right direction.

"This fall is even clearer evidence of the injustice of basing April's Business Rates rises in England and Scotland on last September's 5.6 per cent Retail Price Index which was a 20 year high. With the Bank of England predicting inflation to fall further, both Governments should sharply reduce that figure to avoid the damage that will be done to jobs and investment."


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