Monthly economic brief: March 2023

Inflation

Total and core inflation rates fell in January.

• UK CPI inflation fell to 10.1% in January, the third successive fall from 11.1% in October, indicating that the inflation rate is now on a downward trend.^[3]

• Similar to recent months, the fall during the month of January was particularly driven by motor fuels, with petrol and diesel prices now around 21% and 13% respectively lower than their recent peaks in July 2022, though remain higher over the year as a whole. Further downward contributions to the rate came from restaurants and hotels, although the annual inflation rate remained elevated at 10.8%, down from 11.3% in December 2022 which was the highest rate since September 1991. The largest upward contribution to the rate in January was in alcoholic beverages and tobacco, with the price index rising 2.7% over the month.
• However, compared to last year (annual inflation rates), the price level of housing, water, electricity, gas and other fuels continued to have the largest increase (26.7% in January, up from 26.6% in December) followed by food and non-alcoholic beverages (16.7%, down from 16.8% in December).

• Core inflation, which excludes food, energy, alcohol and tobacco, fell to 5.8% in January (down from 6.3%) and is at its lowest annual rate since June last year. Core inflation has been around 6% since April 2022, highlighting that energy price rises have been the main driver of overall inflation over this period. However, over the longer term, core inflation has risen from 1.4% at the start of 2021 and its persistence reflects that inflation has been broad based.