UK Inflation Surprise Increase to 4.0% pa in December 2023

Published / Last Updated on 17/01/2024

The Office for National Statistics (ONS) has this morning (7am) released Consumer Prices Index (CPI) inflation figures for December 2023 and it has increased by 0.1% pa to 4.0% pa, an increase from 3.9% pa in November 2023 but still way below October 2023 (4.6% pa) and a huge fall of 2.7% since September 2023 (6.7% pa).

In November we expected the fall, but December saw an increase following changes to alcohol taxation from August 2023, that started to filter through in December as we all spent more money on festivities.

In November, we had all been expecting the trend of price increases slowing down to continue but at 3.9% pa, it was a bigger fall than anticipated with inflation still at its lowest point for 2 years.  That said, further pressure will build as the Red Sea piracy attacks force containers to route away from Suez and round the Cape the Good Hope (South Africa) pushing fuel and imported goods prices up.

Food and non-alcoholic beverages, alcohol, tobacco, and household goods were the biggest contributors to the rise in CPI and that is to be expected with the festive season build up as well as more spend on getting your home and food ready for the festive season.

RPI Still Falling Though

The old measure of inflation RPI, an arithmetical mean of the average prices of a basket of household spending (rather than the geometric mean for CPI) fell again by 0.1% to 5.2% pa (it fell 0.8% to 5.3% pa in November and today is now 3.5% lower than it was 3 months ago).  RPI includes housing costs and with mortgage rates falling and rent increases slowing, it is no surprise that RPI came down.  We prefer RPI as a measure as it tells us that things are still tight when looking at whole expenditure but we understand the Government’s desire not to use RPI as an official national statistic because it would become a ‘vicious circle’ if the Bank of England was using RPI as the benchmark to judge increasing interest rates to bring inflation down because any increase in interest rates would, by default, push RPI up.


The West now has a battle with inflation with both US and UK CPI inflation up.  Some is to be expected but we suspect with the Red Sea issues that prices may creep up for a period.  We said last month “we suspect there could be a spike in December or January’s inflation for transport costs and other goods from the Far East.” And this appears to now be starting.

This Bank of England does not have any room for interest rate cuts now, but we have already suggested this would likely be the case until at least Autumn 2024 or even into 2025.  Stock markets will no doubt fall back down this week.

Next UK inflation report: 14th February 2024.

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