January 15, 2013 10:21 am

Inflation flat despite rising energy bills

UK inflation remained at 2.7 per cent for the third month in a row in December, with the rise in gas and electricity bills the main source of price pressures.

Official data published on Tuesday confirmed analysts’ expectations that annual consumer price inflation remained unchanged.

Price rises from four of the six main gas and electricity suppliers were factored into the Office for National Statistics’ calculation this month, including a rise from British Gas, the UK’s largest energy supplier. The other three suppliers were EDF, NPower and Scottish Power.

Rises in the cost of food and drink also contributed to inflation remaining high. Lower air fares helped contain price pressures, with fares rising only half as much as they did a year ago.

Core inflation, which excludes the more volatile elements of the inflation basket such as food and energy prices, fell from 2.6 per cent to 2.4 per cent.

“We already knew that the recent utility price rises would add about 0.3 percentage points to inflation in December. But the good news was that this was broadly offset by a fall in core inflation, the first drop since July,” said Vicky Redwood, economist at Capital Economics. “Sluggish consumer demand seems to have prompted retailers to discount a bit more heavily than last year over the festive period.”

Inflation has now been above the Bank of England’s 2 per cent target for three years and rose as high as 5.2 per cent last autumn.

The retail price index measure of inflation came in at 3.1 per cent for the 12 months to December, slightly higher than analysts’ expectations.

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