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Consumer price inflation, UK: December 2020

21st January 2021

Details from the Report by the Office for National Statistics.

Main points

The Consumer Prices Index including owner occupiers' housing costs (CPIH) 12-month inflation rate was 0.8% in December 2020, up from 0.6% in November.

The largest contribution to the CPIH 12-month inflation rate came from recreation and culture (0.35 percentage points).

Rising transport costs contributed 0.11 percentage points to the monthly change, while increasing prices for clothing, and recreation and culture items both contributed 0.10 percentage points to help increase inflation; these were partially offset by a downward contribution from falling food and non-alcoholic beverage prices.

On a monthly basis, the CPIH grew by 0.2% in December 2020, following a 0.1% fall in November.

As a result of restrictions caused by the coronavirus (COVID-19) pandemic easing in some areas in December 2020, the number of CPIH items identified as unavailable was nine, accounting for 2.0% of the basket by weight; this number had decreased from 72 in November; for the December collection (which took place on or around 15 December 2020), we collected a weighted total of 81.5% of comparable coverage collected before the first lockdown (excluding unavailable items).

The Consumer Prices Index (CPI) 12-month rate was 0.6% in December 2020, up from 0.3% in November; on a monthly basis, CPI grew by 0.3% in December 2020, following a 0.1% fall in November.

There were notable increases to the contributions from four broad groups between November and December 2020. However, in December 2020, the downward contribution from food and non-alcoholic beverages also increased in size. There were further downward contributions to the CPIH 12-month inflation rate from clothing and footwear; and furniture, household equipment and maintenance.

Over the last 10 years, the largest contribution to the annual CPIH inflation rate came from either housing and household services or transport. However, this changed in April 2020 because of a combination of reduced household utility bills and falling motor fuel prices.

Since then, the largest contribution has come from recreation and culture. The contribution from this group increased between March and April 2020 (to stand at 0.31 percentage points). Prices for data-processing equipment, computer games, games consoles and children's toys rose in April 2020 - unlike the March to April falls observed in recent years - partly as a result of the restrictions caused by the coronavirus (COVID-19) pandemic.

The contribution from recreation and culture has fluctuated since then, because of price movements for computer games and consoles both in 2020 and the equivalent months in 2019. Despite the contribution falling to 0.24 percentage points in November 2020, in December 2020, the contribution from recreation and culture rose to 0.35 percentage points to equal the same level in August 2020. This was the joint highest level since February 2019.

During the last two years, the contribution from transport has shown more variation than any other group, ranging from an upward contribution of 0.59 percentage points in November 2018 to a downward contribution of 0.20 percentage points in May 2020. The contribution from transport has been comparatively stable between September and November 2020, with the 12-month inflation rate for the group at or just above 1.0%. However, in December 2020, the 12-month inflation rate for the group rose to 1.9% (the highest rate since February 2020) and the contribution to the CPIH 12-month inflation rate rose by 0.11 percentage points, to stand at 0.23 percentage points.

Much of the movement over the two-year period comes from changes in the price of motor fuels, especially during the coronavirus pandemic, though contributions from air fares and second-hand cars have also changed noticeably over the period. In December 2020, the largest individual contribution to the 12-month rate was a downward contribution (of 0.20 percentage points) from motor fuels. Average petrol prices stood at 114.1 pence per litre, down from 124.6 pence per litre in December 2019. Similarly, diesel prices were 118.8 pence per litre in December this year, compared with 129.9 pence per litre in 2019. The upward contribution from transport services increased to 0.17 percentage points in December 2020, from 0.09 percentage points in November 2020.

The contribution from clothing and footwear to the headline rate has mostly been negative over the last two years. Within the year, prices normally follow a clear seasonal pattern, rising over the period from January to May, then falling between May and July as items are placed on sale in preparation for the arrival of autumn product ranges. Prices then tend to rise until further sales in December.

Throughout 2020, we have seen clothing and footwear prices follow a different pattern compared with previous years. We recorded increased discounting during March and April 2020, probably in response to the lockdown, then prices were relatively stable (compared with previous years) to August 2020. Between August and October 2020, prices broadly increased as usual, but this has been followed by a fall between October and November 2020.

In December 2020, clothing prices rose fractionally, where they tend to usually fall because of sales. This meant the downward contribution to the CPIH 12-month inflation rate from the clothing and footwear group reduced in size to 0.09 percentage points in December 2020, from 0.19 percentage points in November 2020.

The contribution to the CPIH 12-month inflation rate from food and non-alcoholic beverages has usually been positive over the last four years but data for December 2020 showed an increase to the size of the downward contribution. This resulted in the largest negative contribution from the group since November 2016 and reflects an overall price fall of 1.4% in the year to December 2020. The negative contributions came from a variety of product groups, with the largest coming from vegetables (including potatoes and tubers).

The largest upward contribution (of 0.11 percentage points) to the change in the CPIH 12-month inflation rate, between November and December 2020, came from transport. Much of the upward contribution (0.08 percentage points) came from transport services. Despite the travel restrictions in place in December, prices for air fares followed their usual seasonal pattern, with price increases between November and December 2020, albeit by more than between the same two months in 2019. In 2019, the timing of the price collection days in relation to Christmas may have been a factor in price increases being lower than previous years.

Air fares made an upward contribution of 0.03 percentage points and there were further upward contributions of 0.03 and 0.02 percentage points from sea and coach fares, respectively. For both air and sea fares, we are following the Foreign, Commonwealth and Development Office (FCDO) travel advice and have excluded journeys from the sample to destinations where all but essential travel was advised.

Overall, there was a further small upward contribution (of 0.02 percentage points) from operation of personal transport equipment. The large upward contribution (of 0.04 percentage points) from fuels and lubricants was partially offset by a small downward contribution (of 0.02 percentage points) from maintenance and repairs, where membership fees for some roadside recovery service providers were discounted.

Between November and December 2020, petrol prices rose by 1.5 pence per litre, to stand at 114.1 pence per litre, and diesel prices rose by 1.4 pence per litre, to stand at 118.8 pence per litre. In comparison, between November and December 2019, petrol and diesel prices fell by 0.9 and 0.4 pence per litre, to stand at 124.6 and 129.9 pence per litre, respectively.

Clothing and footwear prices overall rose slightly (by 0.1%) between November and December 2020, compared with a fall of 1.8% between the same two months in 2019. Prices usually fall between these two months but price movements across 2020 have been unusual compared with previous years and appear to have been affected by the impact of coronavirus (COVID-19).

The overall price rises in December 2020 follow increased discounting in November 2020, as Black Friday sales may have spread further across the month. Between November and December 2020, the proportion of clothing and footwear items reported as being discounted increased so we would have expected prices to have fallen overall in the month. However, there was also evidence of a greater proportion of recoveries, where prices returned to a higher price, which appears to have offset the small increase in the number of discounted items.

Within clothing and footwear, most of the upward contribution (0.09 percentage points) came from clothing, with women's and men's clothing contributing 0.05 and 0.04 percentage points, respectively. Footwear, and other clothing and clothing accessories also had smaller upward effects (each of 0.01 percentage points).

There was also a large upward contribution to the CPIH 12-month inflation rate (of 0.10 percentage points) from the recreation and culture grouping. Prices overall rose by 0.5% between November and December 2020, compared with a fall of 0.3% between the same two months in 2019. The largest upward contribution came from data processing equipment, where prices for computer software, PC peripherals and laptops were overall largely unchanged between November and December 2020, but fell between the same two months in 2019.

Other recreational items, gardens and pets overall made an upward contribution of 0.03 percentage points. Across this broad grouping, the largest upward contribution came from computer games downloads and there were further smaller upward contributions from computer game consoles, equipment for sport, and plants and flowers. These upward movements were partially offset by small downward contributions from pre-school activity toys and board games, where prices fell in the run up to Christmas.

There was a further small upward contribution from recreational and cultural services. The upward contributions in this division were partially offset by a small downward contribution from package holidays.

The final large upward contribution (of 0.05 percentage points) to change in the CPIH 12-month inflation rate came from alcohol and tobacco. The 2.2% average price rise between November and December 2020 for tobacco products reflected an increase in duty on such products, which came into effect from the 16 November 2020. The duty change was not reflected in the November indices because it came into effect after the November data were collected on or around 10 November 2020. Prices for tobacco products were unchanged between November and December 2019, which resulted in an upward contribution of 0.04 percentage points.

Housing and household services had a small upward contribution (of 0.02 percentage points) to the change in the CPIH 12-month inflation rate. Owner occupiers' housing costs and liquid fuels prices both increased between November and December 2020 by more than between the same two months of 2019.

The largest, partially offsetting, downward contribution (of 0.07 percentage points) to the change in the CPIH 12-month inflation rate between November and December 2020 came from food and non-alcoholic beverages, with prices falling by 0.4% this year, compared with a rise of 0.6% between the same two months in 2019. The effect comprised small movements from a variety of product groups, with the largest coming from vegetables (0.03 percentage points) and meats (0.02 percentage points). The largest individual downward contributions in these groups came from cooked ham and cauliflowers. The December 2020 price collection was completed on or around 15 December 2020, so our price quotes were not influenced by the reported stock shortages in supermarkets as we approached the end of the year.

Between November and December 2020, prices for furniture, household equipment and maintenance overall rose by 0.9%, compared with a larger increase (of 1.4%) between November and December 2019. This resulted in a small downward contribution of 0.03 percentage points. There were small downward contributions from household appliances, fitting and repairs; household textiles; and glassware, tableware and household utensils. There were standout movements across the division, coming from plastic storage containers, electric kettles and leather settees. These downward movements were partially offset by a small upward contribution from carpets and other floor coverings, where prices rose this year by more than in 2019.

There was a further small downward contribution (of 0.02 percentage points) to the change in the CPIH 12-month inflation rate between November and December 2020 from restaurants and hotels. Prices, overall, were estimated to have fallen by 0.8% between November and December 2020, compared with a smaller fall of 0.5% between the same two months in 2019.

Within this group, there were diverse contributions coming from differing categories. There was a large downward effect (of 0.08 percentage points) coming from accommodation services (from overnight hotel accommodation). This was partially offset by an upward effect (of 0.06 percentage points) coming from catering services, which includes restaurants and cafes, and canteens.

The final small downward contribution (of 0.02 percentage points) came from the communication grouping. Overall, prices were unchanged between November and December 2020 but had risen by 0.8% between the same two months in 2019. The downward contribution came entirely from mobile phone charges.

The number of CPIH items that were unavailable to UK consumers in December 2020 reduced to nine from 72 in November 2020. In total, these unavailable items had a downward contribution of 0.01 percentage points to the change in the CPIH 12-month inflation rate. Most imputed items made no overall contribution to the change in the rate, with all of their contributions being less than 0.01 percentage points in magnitude.

In December 2020, the contribution of housing components to the CPIH 12-month inflation rate rose to 0.18 percentage points, an increase of 0.02 percentage points since November 2020. The contribution has been relatively low since April 2020 (in contrast with contributions in excess of 0.50 percentage points at the start of 2020) as a result of reduced contributions from electricity, gas, liquid fuels, water supply and sewerage collection. The small upward movement between the latest two months has been caused by a small increase in the contributions from owner occupiers’ housing costs and a small easing in the downward effect from liquid fuels, where there was a sizable increase in price between November and December 2020.

Looking across a longer timeframe, the contribution from OOH had been on a downward trend from a high in October 2016. However, it has stabilised since early 2018 and made the largest contribution to the CPIH 12-month inflation rate from all the housing and household services categories throughout most of 2019 and into 2020. The measurement of OOH uses the rent paid for an equivalent house as a proxy for the costs faced by an owner-occupier. It includes the rents paid for all lets, not just new lets, so that changes in rents take longer to feed through than in the case of measures based on new lets only.

Electricity, gas and other fuels made a negative contribution during 2015 and 2016, but subsequent rises, most notably in electricity prices, saw the contribution turn positive through 2017 and into 2018. Further electricity and gas price rises in summer and autumn 2018 increased their contribution to the CPIH 12-month rate.

The introduction of the Office of Gas and Electricity Markets’ (Ofgem’s) initial energy price cap resulted in reduced contributions to the CPIH 12-month inflation rate for January to March 2019. However, the contribution increased in April 2019 as energy providers responded to Ofgem’s subsequent raising of the price cap. There was then a negative contribution between October and December 2019, before the price reductions in January 2019 unwound, leading to an upward contribution from January 2020.

The introduction of the April 2020 Ofgem price cap resulted in a further negative contribution as prices of electricity increased slightly by 0.2% and gas prices fell by 3.5% on the month, compared with larger electricity and gas price rises of 10.9% and 9.3% respectively in April 2019. The latest energy price cap (PDF, 354KB), introduced on 1 October 2020, saw another reduction in the contribution from gas and electricity, with prices falling by 12.3% and 3.2%, respectively, between September and October 2020. Prices fell by 8.7% for gas and 2.2% for electricity between the same two months in 2019.

The increases in Council Tax that started in 2016 caused its contribution to rise over the following few years, but there was little change when the 2019 increases were introduced in April last year and there was a slight easing in the contribution in April this year.

The reduction in the contribution from rents between 2016 and 2018 is likely to be a result of a policy to reduce social housing rent. The contribution from rent in total, though, has subsequently risen since early 2018.

Other housing costs (namely, regular maintenance and repair, along with water and sewerage services) tend to make small contributions to the 12-month inflation rate. The contribution from water and sewerage services turned negative in April this year when bills were reduced as a result of the Water Services Regulation Authority (Ofwat) encouraging suppliers to reduce household bills.

Read the full report with graphs and links to more data at

https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/december2020