UK Inflation Hits 10.1% As Food Prices Hit 40-Year High
The UK’s inflation rate increased to 10.1% in July, marking the first time in more than 40 years that the rate has increased by double digits
Food price increases caused the consumer price index (CPI) to increase from 9.4% in June to its highest level since February 1982. The double-digit percentage was higher than experts’ predictions of an increase to 9.8% and represents a further squeeze on people’s pockets.
The numbers released on Wednesday illustrated the challenging challenge the Bank of England (BoE) confronts in bringing inflation down, given that widespread price increases across the UK economy in July led to an inflation rate higher than in other G7 nations.
The ONS noted that the 0.7% rise in prices in July was out of the ordinary since prices often decline in July because of High Street deals. According to the statistics office, the rate of inflation this month was the highest for any July since comparable monthly data began in 1988.
Bread, dairy products, meat, and vegetables were the goods that contributed the most to the rise in inflation, according to Grant Fiztner, chief economist at the ONS. As a result, prices for takeaways increased. The price of package holidays also increased far more quickly this year than it did in 2021 due to the chaos at airports and the limited number of flights.
While inflation has increased in many advanced economies, it has been higher in the UK than in the G7 and most European countries.
This is due to the increased gas consumption in the nation, the spending growth that was underpinning last year, the private sector’s pay rise above 5%, and the ease with which businesses anticipate passing on higher prices to customers.
A further increase in energy costs is anticipated to put households under more pressure this autumn. The Bank of England predicts that this increase will push inflation beyond 13% and start a protracted recession as families cut down on their expenditure.
On Monday, data from the ONS revealed that employees had seen a record real-term wage decline as a result of rising costs.
The increase in inflation will put more on the government to do more to lower living expenses.
Chancellor Nadhim Zahawi said: “I understand that times are tough, and people are worried about increases in prices that countries around the world are facing.
“Although there are no easy solutions, we are helping where we can through a £37bn support package, with further payments for those on the lowest incomes, pensioners and the disabled, and £400 off energy bills for everyone in the coming months.
“Getting inflation under control is my top priority, and we are taking action through strong, independent monetary policy, responsible tax and spending decisions, and reforms to boost productivity and growth.”
Despite the bleak picture for the economy, a spokeswoman for Boris Johnson has said that there won’t be any further government action until the Tory leadership contest concludes on September 5 — at which point either Rishi Sunak or Liz Truss will be elected as the next Prime Minister.
Rocio Concha, Which? director of policy and advocacy, said: “These figures underline the scale of the cost-of-living crisis and make clear that millions of people face a dire financial situation in the months ahead. With bills set to rise further, it’s clear that the current level of cost-of-living government help will not be sufficient.
“Ministers must now move quickly to increase the amount of support for those who are struggling, and businesses in essential sectors, such as supermarkets, energy and telecoms, must also do everything they can to make sure customers are getting a good deal and extra support if they need it.”
Inflation is anticipated to moderate a bit in August, helped by lower petrol/diesel costs, but according to predictions, when the energy price ceiling is raised once again in October, it might rocket to 13.3%. According to the Bank of England, this may cause the UK to enter a recession.
Helen Dickinson, chief executive of the British Retail Consortium, said: “Consumers had little respite from the cost-of-living squeeze as prices rose again in July. Soaring household bills and transport costs remain the biggest headache, holding back discretionary spending across the UK as real incomes continued to fall.
“With inflation showing little sign of slowing, retailers could face a 10% hike in their business rates bill in the coming year. This would impose a cost-nightmare of hundreds of millions of pounds on retailers who are already struggling with razor-thin margins. The next prime minister must act, freezing the multiplier to avoid placing a further burden on retailers, and the customers they serve.”
General secretary of the Trades Union Congress Frances O’Grady urged the government to help UK households. She said: “Families are facing a cost-of-living emergency. Ministers must cancel the catastrophic rise to energy bills this autumn. And to reduce future inflationary pressures and make energy more affordable, they should bring energy retail into public ownership.
“To help people with the cost of living this winter, government should bring forward increases to universal credit and the national minimum wage.
“And companies that were supported by taxpayers through the pandemic must step up to help too. They should show profit restraint to help keep prices down and to prioritise pay rises for staff.”
As soaring food costs caused inflation to reach another 40-year high, Boris Johnson has come under fire for his inaction while on vacation.
Asda chairman Lord Rose criticised a “horrifying” absence of fresh support, saying: “The captain of the ship is on shore leave — nobody is in charge at the moment.”
The Conservative peer cautioned that “inflation isn’t sitting there waiting for us” as the cost-of-living problem worsened and questioned when an emergency budget would be delivered.
Urvish Patel, NIESR economist, said: “The surge in UK inflation was mainly accounted for by food and non-alcoholic beverages which contributed 0.32 percentage points to the monthly change in the headline figure. Underlying inflation increased in all of the 12 UK regions in July, although inflation in the East Midlands is now the highest at 8%.
“Considering the ongoing surge in food prices and the expected hike in the energy price cap in October 2022, we now expect annual CPI inflation to peak close to 13% at the end of 2022 and start of 2023.”
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