Inflation falls to 3% in welcome boost for struggling households
THE inflation rate has rolled back for the first time since June in a welcome boost for struggling households.
The latest figures for December from the Office for National Statistics (ONS) show the Consumer Prices Index (CPI) eased to 3 per cent in December, down from 3.1 per cent in November, the highest level recorded since March 2012.
The outcome was in line with expectations, with some economists now predicting that inflation has now peaked following the sterling's collapse after the Brexit vote.
ONS senior statistician James Tucker said it was "too early to say" whether the fall was part of a long-term trend.
The lion's share of the downward pressure on inflation in December came from air fares, which counted for a smaller slice of the basket of goods and services in 2017 than the year before.
Food and non-alcoholic drinks also recorded smaller monthly growth of 0.6 per cent, down from 0.8 per cent in December 2016.
The smaller expansion was partly driven by a fall in the cost of vegetables, including premium crisps.
In contrast, tobacco was applying upward pressure in response to tax increases announced in the autumn Budget.
Costs lifted by 2.7 per cent month-on-month in December, compared with a 0.2 per cent rise for the same month in 2016.
At the pumps, motorists were facing higher fuel costs, with petrol up by 0.8p per litre on the month to 119.9p per litre.
Diesel also rose by 0.7p to 123.5p.
Economist at Ulster University, Marguerite McPeake said it is unclear whether the inflation rate will rise again in 2018.
"ONS are probably right to conclude that it is too early to judge if December's small decline represents a definite peaking of inflation. The Bank of England are, however, anticipating that during the rest of 2018 inflation will fall back towards the 2 per cent target and perhaps average 2 per cent to 2.4 per cent over the course of the year. Even at 3 per cent consumer price inflation remains at a higher level than average wage growth- whether in Northern Ireland or Great Britain.”
Danske Bank economist Conor Lambe said the Brexit vote has heavily impacted upon the inflation rate over the past year.
“After starting 2017 at a little under the Bank of England's target of 2 per cent, inflation in the UK ended the year one percentage point above the target rate. The increase between the first and last months of the year was mainly a consequence of the sharp depreciation in sterling that followed the Brexit vote."
"For consumers in Northern Ireland and the rest of the UK, the squeeze on spending power throughout 2017 which was brought about by this rise in inflation, has probably been the most direct and recognisable impact of the UK's decision to leave the EU so far," he added.
The Retail Prices Index (RPI), a separate measure of inflation, was 4.1per cent last month, up from 3.9 per cent in November.
The Consumer Prices Index including owner-occupiers' housing costs (CPIH) - the ONS' preferred measure of inflation - reached 2.7 per cent in December, down from 2.8 per cent for the month before.