The sister index including owner occupiers’ housing costs (CPIH) rose 0.9% in the 12 months to January up from 0.8% in December.
Despite the modest rise, inflation remains well below the Bank of England’s target of 2% although but some commentators have warned that inflationary pressures could build in the second half as lockdown restrictions are eased as expected.
Rises in furniture and household goods, restaurants and hotels, food, and transport caused the largest upward contributions to the change in the January 12-month rate. Falling clothing and footwear prices had a downward effect.
ONS said as result of increased lockdown restrictions caused by the Coronavirus pandemic in January the number of CPIH items identified as unavailable was 69, accounting for 8.3% of the basket by weight. This number rose from 9 in December but was lower than the 72 items that were unavailable during the last lockdown in November.
Laith Khalaf, financial analyst at AJ Bell, said: “Inflation has started 2021 in much the same vein as it finished 2020, low and moving sideways.
“In the short term it’s pretty nailed on that inflation will rise quickly towards the Bank of England’s 2% target in the coming months, as the big energy price drops of spring 2020 start to get lapped by fresh data and the temporary VAT cut for hospitality and leisure businesses expires in April. That all coincides with the anticipated lifting of the current lockdown, when price collection will start to more accurately reflect normal activity.”
Luke Bartholomew, senior economist at Aberdeen Standard Investments, said: “While there was nothing especially exciting about today’s inflation report, UK inflation numbers are about to get a lot more interesting over the next few months.
“After a period of sustained low inflation, the combination of energy price base effects and various Covid support measures rolling out of the annual comparison mean that year on year inflation is about to jump much higher. This inflationary upswing is likely to be transitory as spare capacity in the economy starts to weigh on price pressure in the second half of the year. But in the meantime, there will be a squeeze on household’s real incomes, and a risk that long run inflation expectations are dragged higher.”