UK inflation falls to 3%

Consumer Prices Index (CPI) annual inflation – the Government's target measure – was 3.0 per cent in January, down from 3.1 per cent in December, according to the Office for National Statistics (ONS).

The largest downward pressure on the CPI annual rate came from transport costs where the price of fuels and lubricants fell this year but rose last year. The average price of petrol fell by 2.9p per litre between December 2008 and January this year, to stand at 86.3p, compared with a rise of 1.3p last year. Diesel prices fell by 4.0p per litre this year, to stand at 98.4p. A fall in car prices, lower costs for vehicle maintenance and repair and a decrease in air fares also contributed to the downward effect.

A further large downward contribution came from housing and household services. Overall housing rents fell slightly this year, compared with a rise a year ago. There was also a downward effect from fuel costs with electricity tariffs and the cost of heating oil falling this year but rising a year ago.

There was a large upward contribution from recreation and culture. The effect was widespread. The price of toys and games increased following heavy discounting in December. The effect also came from cultural services, newspapers, books and stationery, and holidays abroad.

There were further large upward contributions from:

Furniture, household equipment and maintenance where furniture prices fell by less than last year

Alcoholic drink where overall prices rose by more than last year

Miscellaneous goods and services where the effect mainly came from appliances and products for personal care

Clothing and footwear where prices in January fell by less than last year, following some heavy discounting in December

Retail Prices Index (RPI) inflation slowed to 0.1 per cent in January, down from 0.9 per cent in December. The main factors affecting the CPI also affected the RPI. Additionally, there was a large downward contribution from housing with the main effect coming from mortgage interest payments and house depreciation, which are excluded from the CPI.

RPIX inflation – the all items RPI excluding mortgage interest payments – was 2.4 per cent in January, down from 2.8 per cent in December 2008.

As an internationally comparable measure of inflation, the CPI shows that the UK inflation rate in December, at 3.1 per cent, was above the provisional figure for the European Union as a whole of 2.2 per cent.