UK inflation is expected to have risen in December after dropping sharply the month before, economists forecast. The Consumer Prices Index (CPI) could climb from November's 3.2% to as high as 3.6%, driven by surging Christmas travel costs and a tobacco duty hike announced in the autumn budget.
Forecasts vary among analysts. Economists Rob Wood and Elliott Jordan-Doak from Pantheon Macroeconomics predict inflation reached 3.3% in December. Oxford Economics anticipates a sharper increase to 3.6%, while Barclays analysts expect it to remain unchanged at 3.2%.
Holiday Travel Pushes Prices Higher
Christmas travel demand appears to be the primary culprit. Airfares jumped about 30% between November and December as families booked flights and hotels for the holidays. Andrew Goodwin, chief UK economist for Oxford Economics, explained: «Some of November's downward pressure came from volatile categories, including clothing, airfares, and accommodation services, and this is likely to have unwound in December.»
The timing of data collection by the Office for National Statistics (ONS) is crucial. Travel prices could have spiked significantly higher later in December when school holidays began, potentially impacting the final inflation figure.
Long-Term Trajectory Still Downward
Despite the expected December uptick, experts see inflation continuing to fall toward the government's 2% target later this year. Victoria Scholar, head of investment for Interactive Investor, noted: «longer term, the trajectory for inflation is still on the downside, heading back towards the 2% target later this year.»
She pointed to November's budget measures as supportive of lower inflation. «November's budget from the Chancellor was largely viewed as disinflationary owing to its contractionary fiscal measures, including tax increases and spending cuts,» Scholar said. Growing slack in the labor market is also easing inflationary pressures in the UK economy.
Note: This article was created with Artificial Intelligence (AI).
