Inflation remains at 2.7% for third month in a row

The Momentum UK Team 15 January 2013

Inflation held at 2.7% in December according to latest figures from the Office for National Statistics (ONS).

The Consumer Price Index (CPI), which measures the rising cost of goods and services over time, measured inflation at 2.7% for the third month in a row in December, a figure above the 2% target set by the Bank of England.

The ONS reported that the rising cost of utility services proved to be the largest upward pressure, while air travel prices saw the greatest drop.

The figures also prove bad news for savers, with the majority of easy access accounts offering rates below the rate of inflation, which could mean that deposits are losing value in real terms.

There have also be concerns that the rising cost of certain services or goods could impact some age groups more that others. Alliance Trust Management (ATM) reported that while the youngest age group (the under 30s) suffered the highest rate of inflation due partly to a spike in university tuition fees, the oldest age group (75+) also saw a rise in the cost of living.

Commenting, Shona Dobbie, Chief Economist at ATM, said:

"Whilst the official rate of inflation is unchanged this month, our results show that inflation has actually fallen in the case of 50-64 year olds, and increased in the case of the two most elderly age groups.

“But, having said that, we should also note that the official rate of inflation is still higher than that facing most age groups, with the exception of the under 30s, as it reflects the recent sharp rise in university tuition fees. This shows that price movements in just one cost category can have a large impact on the overall rate of inflation which is used in the formulation of monetary policy.”

Commenting on the CPI figures released by the ONS, TUC General Secretary Frances O'Grady said:

“Inflation has been outstripping wage rises for three years now, which has already cost the average worker £4,000.

“Unless inflation falls are matched by stronger pay growth, 2013 will be the fourth year in a row that people have suffered real wage cuts. We won't have a sustainable economic recovery without healthier pay rises.

“The hike in energy bills is particularly tough on the poorest households, who spend over a quarter of their income on utility payments.”

The Retail Prices Index (RPI), which also takes into account house prices, was recorded at 3.1% for the month of December, up from 3.0% in the previous month.