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Inflation below 2% for first time in four years

Released: 18 February 2014 Download PDF

CPI Percentage change over 10 years

United Kingdom

CPI Percentage change over 10 years
Source: Office for National Statistics

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The rate of inflation faced by households was 1.9% in January 2014. The Consumer Prices Index (CPI) – the headline measure of inflation – grew by 1.9% in the year ending January 2014, down slightly from 2.0% in December 2013. This is the first time since November 2009 that inflation has fallen below the Government’s target of 2.0%. Putting the CPI figure into context, a basket of shopping that cost £100.00 in January 2013 would have cost £101.90 in January 2014. There was a comparable drop to 1.8% from 1.9% in the rate of inflation as measured by the CPIH measure which includes owner occupiers’ housing costs.

Some months, a small change in the headline rate of inflation can hide large upward and downward contributions from a range of goods and services. By contrast, the contributions this month were fairly small. Price movements in recreational goods & services, furniture & household goods and alcohol & tobacco sectors were the main contributors to the slow-down in the rate of inflation. Price movements in the miscellaneous goods & services sector partially offset these downward contributions.

When trying to understand inflation it is worthwhile thinking about the sectors that contribute to the actual rate of inflation (i.e. – what makes up the 1.9%) in addition to the sectors that contribute to changes in the rate of inflation (i.e. – what made inflation change from 2.0% to 1.9%). The former don’t change much from month to month but have the biggest impact on households. In 24 out of the last 27 months, prices in the housing, water, electricity and gas & other fuels sector have been the largest contributor to the inflation rate and currently account for a quarter of inflation.

Source: Office for National Statistics

Background notes

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