More than four in five people in the UK are worried about rising living costs and their ability to afford basic necessities such as food and energy in the coming months, according to a new survey.
Tolga Akmen | Afp | Getty pictures
LONDON – Inflation in the UK reached 9.1[ads1]% year-on-year in May as high food and energy prices continue to exacerbate the country’s cost of living crisis.
The 9.1% increase in the consumer price index, released on Wednesday, was in line with expectations from economists in a Reuters survey and slightly higher than the 9% increase recorded in April.
Consumer prices rose by 0.7% month-on-month in May, slightly above expectations of a 0.6% rise, but well below the 2.5% monthly increase in April, which indicates that inflation is declining somewhat.
In their communication alongside the figures on Wednesday, the UK Office for National Statistics said their estimates suggested that inflation “would have been higher around 1982, with estimates ranging from almost 11% in January down to around 6.5% in December.”
The largest contributions to the inflation rate came from housing and household services, primarily electricity, gas and other fuels, along with transport (mostly motor fuel and used cars).
The consumer price index including homeowners’ costs (CPIH) came in at 7.9% in the 12 months to May, up from 7.8% in April.
“Rising food and non-alcoholic beverages prices, compared with a fall a year ago, resulted in the largest upward contribution to the change in both the CPI and the CPI 12-month inflation rates between April and May 2022 (0.17 percentage points for the CPI),” he said. ONS in its report.
The Bank of England last week saw a fifth consecutive rise in interest rates, but stopped in relation to the aggressive increases seen in the US and Switzerland, as it appears to be taming inflation without amplifying the current economic downturn.
The central bank interest rate is currently at a 13-year high of 1.25%, and the bank expects CPI inflation to exceed 11% by October.
The UK energy regulator increased household energy price ceilings by 54% from 1 April to accommodate an increase in wholesale energy prices, including a record increase in gas prices, and has not ruled out further increases in the ceiling in its periodic assessments this year.
Cost of living crisis
Paul Craig, portfolio manager at Quilter Investors, said Wednesday’s inflationary pressures were a reminder of the challenges facing the central bank, government, businesses and consumers.
“Disappointingly, the cost-of-living crisis is not going to be a short-lived affair, and this means that the Bank of England will eventually be stuck between a rock and a hard place,” Craig said.
“While the US has recognized the need to go hard and fast on interest rates, the Bank of England continues to slump at a slower pace, trying not to tip the economy into recession at a time when businesses and consumers are feeling the pinch. “
However, he suggested that the bank’s current strategy does little to stop inflation from running away, meaning that “more difficult decisions will come very soon,” with the bank already hinting at a larger increase at its next meeting.
A recent survey showed that a quarter of Britons have resorted to skipping meals as inflationary pressures and a food crisis merge in what Bank of England Governor Andrew Bailey has called an “apocalyptic” view for consumers.
Along with the external shocks the global economy is facing – such as food and energy price rises in the midst of the war in Ukraine and supply chain problems due to persistent bottlenecks in the Covid-19 pandemic – Britain is also navigating domestic press, such as the government’s historic fiscal support. and the effects of Brexit.
Economists have also shown signs of a tightening of labor market conditions and headline inflation that filters through to the broader economy. Britain is currently embroiled in huge national rail strikes, and Nobel Prize-winning economist Christopher Pissarides told CNBC on Tuesday that the labor market is “worse than the 1970s”.
Quilters Craig indicated that the government and the central bank will monitor the labor market closely, and not just for indications of further strikes due to inflation-bearing wage increases.
“With inflation where it is, any sign of employment weakness creeping in will be a major warning sign for the economy,” he said.