Food prices fall for first time in two years, reveals ONS inflation data

The Consumer Price Index (CPI), the Office of National Statistics’ (ONS) headline rate of inflation, has held at 4% in January, despite forecasts predicting a small rise.

A small rise in inflation in January had been expected as a result of the increase in Ofgem’s energy price cap pushing up bills at the start of the month. However, price rises for household gas and electricity have been offset by the first month-on-month fall in food prices for two years. Clothing and footwear, transport costs (including motor fuels), and household goods also all saw falls in prices compared to December 2023.

Despite the month on month falls, prices remain up on January 2023 across all categories in the ONS’ basket of goods used to calculate the CPI, with the sole exception of transport. The average price of petrol fell by 2.9 pence per litre between December 2023 and January 2024, to stand at 139.9 pence per litre, down from 149.4 pence per litre in January 2023. Diesel prices fell by 3.1 pence per litre this year, to stand at 148.3 pence per litre, down from 172.1 pence per litre in January 2023.

Inflation remains above the Bank of England’s 2% target rate, meaning that despite avoiding an expected rise in prices, a reduction in interest rates remains unlikely while pay growth remains high. Inflation also continues to be higher in the UK than other comparable economies – inflation in the US fell to 3.1% last month, while the EU member average stood at 3.4%.

Alongside inflation data, the ONS has also published its UK House Price Index for December 2023. Data revealed a meagre 0.2% average house price increase across the UK compared to the previous month, however, with prices overall down 2.1% to £302,000, driven largely by falls in London and the South East. In the North-west, homeowners in the region saw the greatest annual price rise, up 1.2% on December 2022, with a monthly increase of 2.5% compared to November with average house prices in the region at £218,000.