Share Prices & Company Research


18 February 2021

Inflation Could Exceed 2% in 2021, Warns ONS

Inflation could be set to exceed the Bank of England’s (BoE) 2% target by the end of 2021, the Office for National Statistics (ONS) has warned.

January saw the prices of food and household goods rise in what analysts suggest could be the first step towards post-lockdown costs increasing, possibly beyond the 2% benchmark. As can be expected over the festive period, New Year sales also had an impact, meaning that the inflation rate in January 2021 was 0.7%, up from 0.6% in December.

Despite the closure of much of the UK’s hospitality industry and reduced demand for public transport in December, restaurants, hotels and transport made the next largest upward contributions to change in the January 2021 12-month rate. As national lockdowns were in place during the month, many elements in this category were unavailable to consumers and, therefore, price movements were inputted using the all-items Consumer Price Index (CPI) monthly and annual growth rates (for available items) as outlined in Coronavirus and the effects on UK prices. Travel for holidays is currently banned under lockdown rules, but hotel stays for work and quarantine purposes is permitted.

In terms of consumer goods, household item retailers offered discounts below the usual level in the festive sales, while consumers paid more for food, ONS figures suggest. Jonathan Athow, Deputy National Statistician for Economic Statistics, ONS, noted that the price of household goods was higher due to these lower-than-expected discounts on items such as furniture and bedding.

In the food and drink category, prices rose by 0.6% between December 2020 to January 2021, compared to a fall of 0.1% in the same period 12 months prior. Meanwhile, clothing and footwear experienced the largest monthly change in inflation, falling by 4.8%. To put this into context, clothing and footwear prices fell by 3.3% between December 2019 and January 2020. The ONS states that prices usually dip between these two months, but added that price movements throughout 2020 were “unusual” and were impacted by COVID-19.

The rollout of the Coronavirus vaccine is also likely to increase inflation as the UK economy unlocks and consumers consider spending an estimated £125bn in savings made while in lockdown.
Inflation Could Exceed 2% in 2021, Warns ONS

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21 October 2021
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