GettyImages_Cigarettes_Credit MmeEmil

Source: GettyImages_Credit MmeEmil

A pile of loose cigarettes

The Consumer Prices Index (CPI) rose by 4.0% in the 12 months to December 2023, the first time the rate has increased since February 2023, according to the Office for National Statistics (ONS).

The largest upward contribution to the monthly change in CPI annual rates came from alcohol and tobacco, while the largest downward contribution came from food and non-alcoholic beverages.

ONS figures showed that prices in the alcohol and tobacco division rose by 12.8% in the year to December 2023, compared with a rise of 10.2% in November. 

The increase in the annual rate was largely the result of the increase in tobacco duty, after the government announced higher taxes in their autumn statement. Tobacco prices rose by 4.1% between November and December compared with a 0.3% rise between the same two months last year, leading to an annual increase of 16.0%.

Alcohol prices fell by 1.6% between November and December 2023 and by 2.3% between the same two months last year, leading to an annual increase of 9.6%.

Grant Fitzner, Chief Economist at the Office for National Statistics, 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 still 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”. 

Kris Hamer, director of insight of the British Retail Consortium, stated that the rises in alcohol and tobacco products meant that efforts to bring down inflation had “faltered” in December, but highlighted that the ninth consecutive fall in the inflation rate for food had relieved some pressure on struggling households.

“While inflation overall remains positive, there were falls in the price of fish and yoghurt, though the price of other products such as olive oil rose due to extreme weather conditions in Europe,” he said. 

“Retailers face a number of extra costs this year that threaten the progress made to reduce prices. New EU border checks this month, disruption in the Red Sea, a hike to business rates in April, and the potential of a new grocer surtax in Scotland are all challenges that retailers need to navigate in 2024. With an election in the next 12 months, it is time political parties understand the value of retail to the wider economy and set out a clear and cohesive plan for retail in their manifestos. Allowing retail to thrive will create jobs, bring down prices for households, and support communities up and down the country.”