Inflation hits new 40-year high at 10.1%
The biggest contribution to this figure was rising food prices, which rose by 2.3% between June and July 2022, the highest increase in 20 years
Inflation has once again broken records with a new 40-year high recorded last month, as the Consumer Price Index (CPI) hit 10.1% in the 12 months to July 2022, up from 9.4% in June.
According to the Office for National Statistics (ONS), the biggest contribution to this figure was rising food prices, which rose by 2.3% between June and July 2022, the highest increase in 20 years.
The annual inflation rate of food and beverages prices now runs at 12.7%, up from 9.8% in June. The annual rate of inflation was last higher in August 2008, when it ran at 13.2%.
This was in part fuelled by significant price rises in bread and cereals, milk, cheese and eggs, where prices for shop-bought and delivered milk, cheddar cheese and yoghurts “increased notably”.
It comes as the ONS yesterday reported that regular pay in the UK fell by a “record” 3% in the quarter ending June 2022, the steepest decline since records began two decades ago.
Not accounting for inflation, growth in regular pay, excluding bonuses, would be 4.7% in April to June. However, most pay rises failed to match June’s rate of inflation at 9.4%, leading to the overall fall in real terms.
Commenting on the figures, ONS chief economist Grant Fitzner said: “A wide range of price rises drove inflation up again this month. Food prices rose notably, particularly bakery products, dairy, meat and vegetables, which was also reflected in higher takeaway prices. Price rises in other staple items, such as pet food, toilet rolls, toothbrushes and deodorants also pushed up inflation in July.
“Driven by higher demand, the price for package holidays rose, after falling at the same time last year while air fares also increased. The cost of both raw materials and goods leaving factories continued to rise, driven by the price of metals and food respectively.”
Kien Tan, director of Retail Strategy at PwC, added: “Following yesterday’s confirmation that real earnings declined by a record 3% in between April and June this year, today’s CPI inflation figures confirm that things are going to get a lot worse for retailers – and consumers – before they get better.
“Supermarkets have had little choice but to pass on price increases from suppliers, themselves contending with unprecedented inflation in raw material and ingredient input costs. This has been particularly acute in labour and utility intensive categories like dairy, with reports of the price of a pint of milk having more than doubled in some stores since the start of the year.”
He added: “Furthermore, the Bank of England reported in its latest Monetary Policy Report that supermarkets expected inflation to increase further in coming months, so there is unlikely to be any let up in the run up to Christmas, particularly as the delayed effect of input cost inflation starts being passed through in other categories such as meat, vegetables and packaged groceries.
“In the coming months, there will be no way for consumers to avoid the expected grocery price inflation, nor any increase in the energy price cap…With real wages declining and more of consumers’ earnings diverted to non-discretionary spending, the prospects for the wider retail and leisure sectors are looking increasingly bleak for Autumn and Winter.”
Helen Dickinson, CEO of the British Retail Consortium, said: “Consumers had little respite from the cost of living squeeze as prices rose again in July. Soaring household bills and transport costs remain the biggest headache, holding back discretionary spending across the UK as real incomes continued to fall.
“Retailers are trying to support their customers by expanding value ranges, fixing prices for some essential goods, offering discounted kids meals, and providing discounts for vulnerable groups. However, the sheer weight of costs bearing down on the industry and its supply chains has been proving impossible to fully absorb.”
She added: “With inflation showing little sign of slowing, retailers could face a 10% hike in their business rates bill in the coming year. This would impose a cost-nightmare of hundreds of millions of pounds on retailers who are already struggling with razor-thin margins. The next Prime Minister must act, freezing the multiplier to avoid placing a further burden on retailers, and the customers they serve.”
