Tolga Akmen | Afp | Getty Images LONDON – Inflation in the UK reached 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% increase recorded in April. Consumer prices rose 0.7% month-on-month in May, slightly above expectations of a 0.6% rise, but much less than the 2.5% monthly rise in April, indicating that inflation is slowing somewhat. In a statement released on Wednesday, the UK Office for National Statistics said its estimates showed that inflation “would have been higher around 1982, when estimates ranged from almost 11% in January to around 6.5%”. in December”. The biggest contributors to inflation came from housing and services, mainly electricity, gas and other fuels, along with transportation (mainly motor fuels and used cars). The Consumer Price Index, including the cost of housing owners (CPIH), stood at 7.9% in the 12 months to May, up from 7.8% in April. “Rising food and non-alcoholic beverage prices, compared to the decline a year ago, resulted in the largest upward contribution to both the CPI and the 12-month inflation rate between April and May 2022 (0.17 percentage points). units for the CPI) “, the ONS stated in its report. The Bank of England last week applied a fifth consecutive rate hike, although it stopped less than the aggressive increases seen in the US and Switzerland, as it seems to tame inflation without exacerbating the current economic slowdown. The key 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 Regulatory Authority has raised its household energy price ceiling by 54% since 1 April to address the rise in wholesale energy prices, including record gas prices, and has not ruled out further increases to the ceiling in its periodic reviews this year.
Cost of living crisis
Paul Craig, portfolio manager at Quilter Investors, said Wednesday’s inflation printout was 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 that ultimately leaves the Bank of England stuck between a rock and a difficult place,” Craig said. “While the US has recognized the need to move interest rates hard and fast, the Bank of England continues to slow down at a slower pace, trying not to lead the economy into recession at a time when businesses and consumers are feeling the pressure. “ However, he suggested that the Bank’s current strategy does little to stem the flow of inflation, which means that “difficult decisions are coming very soon”, with the Bank already hinting at a bigger rise at its next meeting. A recent survey found that a quarter of Britons have resorted to skipping meals as inflationary pressures and the food crisis confuse what Bank of England Governor Andrew Bailey called a “revealing” outlook for consumers. Along with the external shocks facing the global economy – such as rising food and energy prices amid the war in Ukraine and supply chain problems due to the prolonged bottlenecks of the Covid-19 pandemic – the UK is also facing internal shocks. pressures, such as the relaxation of the government historical budget support of the pandemic era and the effects of Brexit. Economists have also pointed to signs of tightening labor market conditions and infiltration of inflation in the wider economy. The UK is currently embroiled in massive national rail strikes, and Nobel laureate economist Christopher Pissaridis told CNBC on Tuesday that the labor market was “worse than it was in the 1970s”. Quilter’s Craig suggested that the government and the central bank monitor the labor market closely, and not just for indications of further strikes due to rising wage arrears. “With inflation where it is, any sign of weakness in employment will be a great warning sign for the economy,” he said.
