"While the January lockdown is likely to have a moderating impact on inflation in the short-term, the success of mass vaccination could boost economic activity"
On a monthly basis, CPI fell by 0.2% in January, following a 0.3% rise in December.
CPIH inflation, which includes owner occupiers’ housing costs, rose to 0.9% over the year to January, up from 0.8% in December. On a monthly basis, CPIH fell by 0.1%, following a 0.2% rise in December.
Furniture and household goods, restaurants and hotels, food, and transport had the largest upward contributions to the change in the January 12-month rate, while falling clothing and footwear prices had a downward effect.
Janine Boshoff, NIESR economist, commented: “Headline inflation increased to 0.7 per cent in January 2021, up from the 0.6 per cent recorded in December 2020.
"Our measure of underlying inflation, which excludes extreme price movements, suggests that consumer prices bottomed out in December 2020.
"While the January lockdown is likely to have a moderating impact on inflation in the short-term, the success of mass vaccination could boost economic activity and increase inflation in the latter half of the year.”
Rachel Winter, associate investment director at Killik & Co, added: “In the month of January consumer spending traditionally goes down post-Christmas, so today’s reported rise in inflation is therefore surprising, particularly given the ongoing closure of non-essential shops, pubs and restaurants.
“Despite the Government preparing to reveal its roadmap out of lockdown over the next few weeks and millions continuing to be vaccinated, the hospitality, retail and leisure industries are still taking a big hit and this is likely to continue for at least the next few months.
“Economists have mixed views on where inflation could go from here. Further increases in unemployment levels could harm consumer confidence, with a resultant knock-on effect on inflation. On the other hand, a post-lockdown spending surge combined with government stimulus could lead to higher inflation over the longer term.”
