Inflation reaches highest level since 1982, ONS reveals
Under-pressure households faced a worse-than-expected hit in July as inflation rises to another 40-year high.
Consumer Prices Index inflation (CPI) reached 10.1% last month, the Office for National Statistics (ONS) revealed. The increase was largely down to food prices and household toiletries, the ONS said.
The measure had been expected to reach 9.8%, according to an average of analysts’ estimates calculated by Pantheon Macroeconomics.
It is the biggest jump in the cost of living since February 1982, when CPI reached 10.4%, according to ONS estimates. It is also a larger jump from the 9.4% inflation in June.
Grant Fitzner, ONS Chief Economist, 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.
“The cost of both raw materials and goods leaving factories continued to rise, driven by the price of metals and food respectively.”
Inflation is expected to fall back a little in August; however, according to estimates it could soar to 13.3% in October when the energy price cap rises again. The Bank of England confirmed they expect this to push the UK into a recession.
Whether or not the Bank’s October prediction proves true remains to be seen. Its forecast for July’s CPI was 9.9%, 0.2 percentage points behind where the ONS has now measured it.
Samuel Tombs, Chief UK Economist at Pantheon Macroeconomics, said the difference between the Bank’s forecast and the measurement is mainly down to surging food prices.
Official data showed that Retail Prices Index (RPI) inflation reached 12.3% in July.
Businesses are also facing pressure from soaring prices, said Alex Veitch, Director of Policy and Public Affairs at the British Chambers of Commerce.
Producer price inflation reached 22.6% in July, among the highest levels since records began.
Veitch said: “The difference between input and output inflation illustrates that many firms are absorbing as much of these additional costs as they can. There is a limit to how much additional cost firms can absorb and is limiting growth and investment.”
He called for the Government to support companies by reviewing the shortage occupations list to help fill more than one million vacancies, and slashing VAT on companies’ energy bills from 20% to 5% in line with the tax that households pay.