Inflation continued its creep upwards in January as the dual impacts of increases in VAT and the continued rise in the price of crude oil hit prices.
According to the Office of National Statistics’ latest measure of CPI inflation the rate rose to 4% in January, up from 3.7% in December.
The increase was particularly impacted by a leap in the cost of fuel which, thanks to the change in VAT as well as rises in fuel duty and the price of crude oil, led to a record high of £1.27 per litre for petrol in January.
Record monthly increases were also seen in the restaurants and cafes market where the VAT change caused prices to rise by 1.4%, largely fuelled by a record monthly increase in the price of alcohol – up by 6.7%.
RPI annual inflation also rose from 4.8% in December to 5.1% last month. The UK inflation rate in December of 3.7% continued to outpace that of the EU as a whole which measured 2.6%.
However despite the rises the British Retail Consortium said retailers weren’t to blame for the rise. It cited its own Shop Price Inflation measure of around 2%.
British Retail Consortium economist, Richard Lim, said: "Our figures show that food inflation is at a 19 month high. Despite that, overall shop prices are still rising more slowly than the official measure which includes petrol, utilities and services. Upward pressure on prices is not coming from the high street.”
In its detailed analysis the ONS confirmed that retailers in the furniture and furnishings market held prices in December whilst prices also fell more than usual in the clothing and footwear markets.