Surprise hike in inflation rate confounds economist predictions

Inflation has taken a surprise upswing to 4% in the year to December 2023 – confounding analyst expectations that it would fall.

The consumer price index rose from 3.9% in November comes as retailers launched sales in the run-up to Christmas in order to try and boost sales.

Meanwhile, the cost of raw materials fell by 2.8%, down from a decrease of 2.7% in November, and the cost of goods leaving factories rose by 0.1%, up from a decrease of 0.1%.

Office of National Statistics chief economist Grant Fitzner said: “The rate of inflation ticked up a little in December, with rises in tobacco prices due to recently introduced duty increases.

“These were partially offset by falling food inflation, where prices rose but at a much lower rate than this time last year.

“Meanwhile, the prices of goods leaving factories are little changed over the last few months, while the costs of raw materials remain lower than a year ago.”

Chancellor Jeremy Hunt said: “As we have seen in the US, France and Germany, inflation does not fall in a straight line, but our plan is working and we should stick to it.

“We took difficult decisions to control borrowing and are now turning a corner, so we need to stay the course we have set out, including boosting growth with more competitive tax levels.”

Mohsin Rashid, chief executive of Zipzero said: “What a blow for Britons. Just as financial recovery had begun to feel possible, hope has once again been ripped away as inflation remains eye-wateringly high – at almost double the Bank of England’s target.

“The inflationary pillage of our pockets is set to continue, at least for the first half of 2024 – so expect tight budgets and financial sacrifice to remain the default for millions across the country. Until inflation is properly squashed back down to manageable levels, it lies with the government and retailers to step up their support for consumers, through targeted relief and competitive pricing respectively.”