The UK consumer prices index (CPI) rose at a 2.7 per cent year-on-year pace in January 2013, unchanged for the fourth month in a row, but fell by 0.5 per cent versus the previous month, according to data from the Office for National Statistics (ONS).

The consensus estimate was for a reading of 2.7% - this is the longest period for which the CPI growth has remained unchanged the ONS said.

The largest upward pressures came from alcohol and air fares. The prices of alcohol and tobacco added 0.12 percentage points to the 12 month rate of change.

Miscellaneous goods & services and clothing provided the largest downward pressures, with the latter subtracting 0.07 percentage points from the twelve month rate of change.

In terms of monthly rates of change, the largest downwards percentage variations were seen in the following categories: Clothing&footwear (-4.9%), Furniture (-2.2%), Transport -0.7%) and Communications (-0.3%).

In greater detail, the fall in clothing prices had been expected after the most recent BRC shop price data for January. Prices of fuels, on the other hand, failed to fall as some economists had expected.

The Retail Prices Index (RPI) increased at a 3.3% clip in January 2013, up from 3.1% in December 2012 and versus a consensus estimate for a 3.2% gain.

Commenting on the data, this is what economists at Barclays Research are saying: "As is likely to become evident in tomorrow's Inflation Report, the monetary policy committee (MPC) is caught between a rock and a hard place. Inflation has been above target for most of the last seven years, and may soon jump back into letter-writing territory.

"Although the MPC views weaker sterling as necessary if the economy is to rebalance, its first consequence is likely to be stronger inflation, and today's data show the first signs of this emergent headache."

"We now forecast CPI inflation of 2.7% in 2013, compared with 2.8% previously, while our forecast for 2014 is 0.2pp lower at 2.4%. We now expect CPI inflation to dip slightly to 2.6% in February, but thereafter see a mini-surge building, with inflation rising to 3.3% in June before subsiding gradually."


AB

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