Drink and clothing push inflation rate to highest for a year

Sharply lower oil prices are set to keep a lid on inflation
Sharply lower oil prices are set to keep a lid on inflation

Inflation edged up to its highest rate for a year last month as rises in the price of alcohol and clothing pushed up the cost of living.

The Consumer Prices Index (CPI) measure of inflation rose to 0.3% in January from 0.2% in December, according to the Office for National Statistics (ONS).

Alcohol and tobacco rose by 1.3% compared with January 2015, when there were heavy discounts on beer.

The ONS said inflation also rose as fuel and food prices dropped less than they did a year ago.

But despite the rise in CPI, inflation still remains historically low, with the Bank of England predicting inflation to remain far below the Government’s 2% target for some time yet.

Sharply lower oil prices are set to keep a lid on inflation, leaving the UK central bank in no hurry to raise rates above 0.5%, where they have remained for nearly seven years.

James Tucker, ONS head of CPI, said: “While still at historically low levels, CPI has today edged up to its highest rate for a year.

“The main reason for the slight rise in inflation was fuel prices falling by less in January than they did at the same point in the previous year.

“Clothing, food and alcoholic drinks also helped to push up inflation, offset by falling air fares.”

The increase to 0.3% marked the third month in a row that CPI has risen, with the rate in January being the same as it was in January 2015.

The ONS said alcohol prices rose 5.2% between December and January, with spirits increasing by 7.5%, beer climbing by 3.6% and wine up 4.8%.

Food prices continued to fall last month, but less than a year ago - by 0.6% between December and January against a 1% fall a year earlier.

Supermarkets have been locked in a price war, as German discounters Aldi and Lidl continue to snap up market share from the Big Four supermarkets.

Fuel prices also dropped last month, but less that a year ago, with petrol falling by two pence per litre between December and January against an 8.5p per litre fall a year earlier.

The average price of petrol on forecourts stood at 101.8p per litre last month, the ONS said.

New Year sales on the high street saw clothing prices fall 3.4% year on year, but dropping less than a year ago.

Shops had been forced to slash prices in December after unseasonably warm weather hit sales of winter clothes.