Calendar An icon of a desk calendar. Cancel An icon of a circle with a diagonal line across. Caret An icon of a block arrow pointing to the right. Email An icon of a paper envelope. Facebook An icon of the Facebook "f" mark. Google An icon of the Google "G" mark. Linked In An icon of the Linked In "in" mark. Logout An icon representing logout. Profile An icon that resembles human head and shoulders. Telephone An icon of a traditional telephone receiver. Tick An icon of a tick mark. Is Public An icon of a human eye and eyelashes. Is Not Public An icon of a human eye and eyelashes with a diagonal line through it. Pause Icon A two-lined pause icon for stopping interactions. Quote Mark A opening quote mark. Quote Mark A closing quote mark. Arrow An icon of an arrow. Folder An icon of a paper folder. Breaking An icon of an exclamation mark on a circular background. Camera An icon of a digital camera. Caret An icon of a caret arrow. Clock An icon of a clock face. Close An icon of the an X shape. Close Icon An icon used to represent where to interact to collapse or dismiss a component Comment An icon of a speech bubble. Comments An icon of a speech bubble, denoting user comments. Ellipsis An icon of 3 horizontal dots. Envelope An icon of a paper envelope. Facebook An icon of a facebook f logo. Camera An icon of a digital camera. Home An icon of a house. Instagram An icon of the Instagram logo. LinkedIn An icon of the LinkedIn logo. Magnifying Glass An icon of a magnifying glass. Search Icon A magnifying glass icon that is used to represent the function of searching. Menu An icon of 3 horizontal lines. Hamburger Menu Icon An icon used to represent a collapsed menu. Next An icon of an arrow pointing to the right. Notice An explanation mark centred inside a circle. Previous An icon of an arrow pointing to the left. Rating An icon of a star. Tag An icon of a tag. Twitter An icon of the Twitter logo. Video Camera An icon of a video camera shape. Speech Bubble Icon A icon displaying a speech bubble WhatsApp An icon of the WhatsApp logo. Information An icon of an information logo. Plus A mathematical 'plus' symbol. Duration An icon indicating Time. Success Tick An icon of a green tick. Success Tick Timeout An icon of a greyed out success tick. Loading Spinner An icon of a loading spinner.

UK inflation hits double digits for the first time in 40 years

© Shutterstock / GoodIdeasInflation.

UK inflation rose more than expected last month to the highest in 40 years, intensifying a squeeze on consumers and adding to pressure for action from the government and Bank of England.

The Consumer Prices Index rose 10.1% in July from a year earlier after a 9.4% gain the month before, the Office for National Statistics said Wednesday. Economists had expected a reading of 9.8%.

Rising food prices made the biggest contribution to this month’s increase, indicating inflationary pressures are spreading beyond energy. The pound briefly spiked to the day’s high of $1.2143 following the release, before paring gains.

“Food prices rose notably, particularly bakery products, dairy, meat and vegetables, which was also reflected in higher takeaway prices,” said Grant Fitzner, chief economist at the ONS. “Price rises in other staple items, such as pet food, toilet rolls, toothbrushes and deodorants also pushed up inflation in July.”

Risk of recession more likely than not

The figures add to a cost-of-living crisis, with wages falling further behind rising prices for goods and services of all kinds. Bank of England Andrew Bailey has signalled he’s prepared to raise interest rates further, and contenders seeking to replace Boris Johnson as prime minister are promising further aid to those struggling to pay their bills.

Economists are growing increasingly pessimistic about the UK, with the risk of a recession now seen as far more likely than not due to rising cost pressures. The BOE expects a recession to start in the fourth quarter, lasting into the early part of 2024.

The central bank expects inflation to surpass 13% later this year when regulators allow energy bills to rise again. That would mark the worst reading since September 1980, when Margaret Thatcher’s government struggled to bring a wage-price spiral under control.

Separate figures showed pipeline price pressures appeared to be easing, with fuel and raw material prices rising just 0.1% in July, the smallest monthly increase since December. It still left input prices up 22.6% on the year, only slightly below the record pace recorded in June.

Output prices rose 1.6% on the month and by 17.1% from a year earlier, the largest annual gain since 1977.

“The cost of both raw materials and goods leaving factories continued to rise, driven by the price of metals and food respectively,” Fitzner said.

Cost-of-living crisis prompting people to demand higher wages

Bailey has blamed Russia for choking off supplies of natural gas, raising the cost of electricity across Europe, for the jump in inflation. Gas futures embedded in the BOE’s forecasts this month were almost double their level in May, and they’ve risen further in the past week.

Those increases are feeding through into the cost of goods and services, prompting people across the country to demand higher wages. Railway workers plan another round of strikes this week, and teachers, barristers and nurses are considering action of their own.

Real wages adjusted for inflation fell 3% in three months through June, the sharpest pace since records began in 2001, official data published Tuesday showed. Employment increased by 160,000 in the second quarter, 46% less than the three months through May, and job vacancies fell for the first time since August 2020.

“The cost-of-living crisis is now very real for both households and businesses, so there needs to be a concrete way forward to support vulnerable groups with higher energy bills,” said Alpesh Paleja, lead economist at the Confederation of British Industry.

More from SG Voice

Latest Posts