The alcohol and tobacco sector was one of the key areas that pushed up the annual rate of inflation, with prices rising by 5.2% in the 12 months to December compared to 4.0% one month earlier. Much of this is likely to be explained by the increase in tobacco duty that came into effect on 26 November 2025.
Elsewhere, the annual rate of inflation in the transport sector rose from 3.7% in November to 4.0% in December, largely driven by air fares. The cost of air travel typically increases in December but, this year, prices were 28.6% higher than the previous month.
When looking at everyday costs that are likely to affect more consumers, car owners may be relieved to learn that the price of petrol and diesel only saw a marginal rise of 0.9% in the 12 months to December.
However, over the same period, the overall cost of food and non-alcoholic drinks increased by an average of 4.5%, compared to 4.2% in the year to November 2025. Bread and cereals saw a particularly noticeable increase in prices, while the cost of vegetables also rose slightly.
Are your savings working hard enough?
“January is the ideal time for savers to set new financial goals and to check if their savings are working as hard as they can,” Eastell commented.