According to a new survey, more than four in five people in the UK are concerned about the rising cost of living and their ability to cover basic needs such as food and energy in the coming months.
Tolga Akmen | Afp | fake images
LONDON — UK inflation hit 9.1% year-on-year in May as rising food and energy prices continue to deepen the country’s cost of living crisis.
The 9.1% rise in the consumer price index, released on Wednesday, was in line with economists’ expectations in a Reuters poll and slightly higher than the 9% rise recorded in April.
Consumer prices rose 0.7% mom in May, slightly above expectations of a 0.6% increase but well below the 2.5% monthly increase in April, indicating that inflation is slowing somewhat.
In its communications alongside Wednesday’s figures, the UK’s Office for National Statistics said its estimates suggested inflation “would have last been highest around 1982, where estimates range from almost 11% in January to approximately 6.5% in December”.
The largest upward contributions to the inflation rate came from housing and domestic services, mainly electricity, gas and other fuels, together with transportation (mainly fuels and second-hand cars).
The consumer price index, including owner-occupant costs of housing (CPIH), came in at 7.9% in the 12 months through May, down from 7.8% in April.
“The rise in food and non-alcoholic beverage prices, compared to declines a year ago, resulted in the largest upward contribution to the change in the 12-month IPCH and CPI inflation rates between April and May 2022 (0.17 percentage points for the IPCH), the ONS said in its report.
The Bank of England last week implemented a fifth consecutive interest rate hike, although it fell short of the aggressive hikes seen in the US and Switzerland, as it seeks to rein in inflation without exacerbating the current economic slowdown.
The main bank rate is currently at a 13-year high of 1.25% and the Bank expects CPI inflation to top 11% in October.
The UK energy regulator increased the energy price cap for households by 54% from April 1 to accommodate a rise in wholesale energy prices, including a record rise in electricity prices. gas, and has not ruled out further cap increases in its periodic reviews this year.
cost of living crisis
Paul Craig, portfolio manager at Quilter Investors, said Wednesday’s inflation data was a reminder of the challenges facing the central bank, the government, businesses and consumers.
“Sadly, the cost of living crisis is not going to be a short-lived affair and ultimately leaves the Bank of England caught between a rock and a hard place,” Craig said.
“While the US has recognized the need to act firmly and quickly on interest rates, the Bank of England continues to move at a slower pace, trying not to push the economy into recession at a time when businesses and consumers are feeling the pressure.”
However, he suggested that the Bank’s current strategy is doing little to prevent inflation from skyrocketing, meaning “more difficult decisions will be made very soon”, and the Bank is already hinting at a bigger increase at its next meeting.
A recent survey showed that a quarter of Britons have resorted to skipping meals as inflationary pressures and the food crisis combine in what Bank of England Governor Andrew Bailey has called an “apocalyptic” outlook for Americans. consumers.
Coupled with external shocks facing the global economy, such as rising food and energy prices amid the war in Ukraine and supply chain issues due to lingering bottlenecks from the Covid pandemic -19, the UK is also dealing with internal pressures, such as the dismantling of government policy. Historic fiscal support from the pandemic era and the effects of Brexit.
Economists have also pointed to signs of tightening labor market conditions and headline inflation seeping into the broader economy. The UK is currently worried about huge nationwide rail strikes, with Nobel Prize-winning economist Christopher Pissarides telling CNBC on Tuesday that the job market is “worse than it was in the 1970s.”
Quilter’s Craig suggested the government and central bank will be watching the labor market closely, and not just for signs of further strikes over inflation-lowering pay rises.
“With inflation where it is, any signs of weakness in employment will be a huge warning signal for the economy,” he said.