Inflation has surged in Britain since the decision by voters in June 2016 to leave the European Union hammered the value of the pound and pushed up the cost of imports.
The combination of high inflation and limited wage growth – as well as uncertainty about the terms on which Britain will leave the European Union in 2019 – is expected to mean Britain’s economy grows more weakly than other EU economies this year.
However, consumer price inflation is expected to start to wane as the peak impact from sterling’s sharp fall in mid-2016 drops out of annual comparisons.
The historic measure of retail price inflation, which is still used to calculate payments on government bonds, student loans and many commercial contracts, edged down to 4.0 percent from December’s six-year high of 4.1 percent – adding to pressure on the government’s already stretched budget.
Tuesday’s CPI data showed downward pressure on inflation from a slower pace of increase in the cost of fuel than a year ago. But the ONS highlighted a smaller than usual seasonal decline in the cost of visiting zoos and gardens as pushing up on price growth.
BoE Governor Mark Carney said last week that inflation could rise above 3 percent before starting a slow descent.
The Office for National Statistics figures suggested less pressure in the pipeline for consumer prices.
Among manufacturers, the cost of raw materials – many of them imported – was 4.7 percent higher than in January 2016, down from 5.4 percent in December and the smallest increase since July 2016. Economists polled by Reuters had expected input prices to rise by 4.2 percent.
Manufacturers increased the prices they charged by 2.8 percent compared with 3.3 percent in December, weaker than the consensus forecast of 3.0 percent and the smallest increase since November 2016.
The ONS also said house prices in December rose by 5.2 percent annual across the United Kingdom as a whole compared with 5.0 percent in November. Prices in London alone increased by 2.5 percent.
Mortgage lender Halifax reported last week that average house prices across Britain rose 2.7 percent year-on-year in the fourth quarter of 2017, but fell on a monthly basis in both December and January.