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Inflation in the UK hit a new 40-year high last month, soaring above 10% for the first time since 1982 and hurting households already struggling to pay their bills even more.
Annual consumer price inflation reached 10.1% in July, according to data released by the Office for National Statistics on Wednesday, up from 9.4% in June. Rising food prices — up 12.7% since July 2021 — were the biggest contributor to the acceleration in inflation, the ONS said.
The headline inflation rate was higher than forecast by a Reuters poll of economists, and food inflation is now at its highest level in 14 years.
“All 11 classes of food and non-alcoholic beverages contributed upward to the change in annual inflation, with prices generally rising this year but falling a year ago,” the ONS said.
The largest upward contributions came from bread and cereals, and from milk, cheese and eggs, with notable price increases for cheddar cheese and yogurt.
On a monthly basis, the consumer price index rose 0.6% in July, compared to no change a year ago. Higher gasoline and diesel prices, along with rising air fares, were also the cause, the ONS added.
The higher-than-expected value will keep pressure on the Bank of England to follow last month’s biggest rate hike in 27 years with further rate hikes, despite mounting evidence of pressure on household budgets and signs that the UK economy is already in entered a recession.
Data released last week shows the country’s GDP fell 0.1% in the second quarter of this year.
And Tuesday’s official labor market report found that paychecks rose 4.7% between April and June, meaning that average incomes fell 3% over the period that takes into account inflation – the biggest drop in the real world. wages since the ONS started keeping more than 20 records. years ago.
“The situation is dire for UK consumers, who are currently under pressure from all sides,” Kallum Pickering, senior economist at Berenberg, wrote in a note to customers. “Wages aren’t rising fast enough to offset rising inflation, but they’re rising too fast for the economy.” [Bank of England’s] like it, because it wants to bring inflation back to target,” he added.
Inflation is expected to pick up further later this year, driven by further increases in regulated energy bills in October. Electricity prices have already increased by 54% in the 12 months to July 2022 and gas prices by 95.7% due to skyrocketing wholesale costs, exacerbated by the Russian invasion of Ukraine in late February.
UK government officials are reportedly exploring options to provide more support to households. But Liz Truss, frontrunner to succeed Boris Johnson as the UK’s next prime minister in early September, has yet to draft a detailed plan beyond promising tax cuts.
The opposition Labor party is calling for an extension of a windfall tax on UK oil and gas companies to help fund a freeze on household heating bills this winter.
— Anna Cooban and Rob North contributed to this article.
