Slowdown in rising cost-of-living set for December pause, say economists

UK inflation could have ticked higher last month, as Christmas getaways helped fuel price rises at the end of the year, economists have said.

Some economists are expecting the rate of Consumer Prices Index (CPI) inflation to have risen in December after falling sharply the previous month.

Rob Wood and Elliott Jordan-Doak, economists for Pantheon Macroeconomics, said they were forecasting CPI to rise to 3.3% in December, from 3.2% in November.

A hike to tobacco duties, which was announced at the autumn budget in November, is set to have pushed up overall inflation during the month.

The price of plane tickets and hotels are also expected to have soared amid stronger demand for Christmas travel.

Analysts forecast that airfares could have jumped by about 30% between November and December.

But economists stressed that the choice of date for the Office for National Statistics (ONS) to collect the latest inflation data would be crucial, as prices would have differed throughout the month.

If it was collected later in the month, travel prices could have been much higher in line with the school holidays, pushing up the overall rate of inflation.

Andrew Goodwin, chief UK economist for Oxford Economics, said he thought the slowdown in the rising cost of living was “temporarily halted” in December.

He said: “Some of November’s downward pressure came from volatile categories, including clothing, airfares, and accommodation services, and this is likely to have unwound in December, although the choice of date for collecting the data will likely have a crucial bearing on the outturn for airfares.”

He is predicting a much sharper increase of CPI inflation to 3.6% in December.

On the other hand, analysts for Barclays said they thought inflation would remain unchanged at 3.2% in December.

They forecast energy price inflation to have slowed, while food and drink price rises to have steadied at the end of the year.

But experts said they thought inflation was still heading downwards this year.

Victoria Scholar, head of investment for Interactive Investor, said that “longer term, the trajectory for inflation is still on the downside, heading back towards the 2% target later this year”.

“November’s budget from the Chancellor was largely viewed as disinflationary owing to its contractionary fiscal measures, including tax increases and spending cuts,” she said.

“Plus, there are growing signs of slack in the labour market, also easing inflationary pressures in the UK economy.”