Liz Truss and Rushi Sunak during The Sun’s Showdown: The Fight for No10, the final head-to-head debate for the Conservative Party leader candidates. The next prime minister will be forced to confront a historic cost-of-living crisis as food and energy prices soar and real incomes shrink.
Dominic Lipinski | Bread Images | Getty Images
LONDON — UK inflation rose to another 40-year high in July as spiraling food and energy prices continued to intensify the country’s historic pressure on households.
The consumer price index rose 10.1% year-on-year, according to estimates released by the Office for National Statistics on Wednesday, above the Reuters consensus forecast of 9.8% and higher than the 9, 4% of June.
Core inflation, which excludes energy, food, alcohol and tobacco, stood at 6.2% in the year to July 2022, up from 5.8% in June and ahead of the projections of 5.9%.
British 2-year Gilt yields rose on Wednesday morning after the release, adding more than 26 basis points to 2.41%, their highest point since November 2008.
Rising food prices were the biggest contributor to the rise in annual inflation rates between June and July, the ONS said in its report.
“Supermarkets have had no choice but to pass on price increases from suppliers, themselves facing unprecedented inflation in raw material and ingredient input costs,” said Kien Tan, chief strategy officer PwC Retail.
“This has been particularly acute in labour- and utility-intensive categories such as dairy, with reports of the price of a pint of milk more than doubling in some stores since the start of the year.”
The ONS reiterated that its indicative estimates of consumer price inflation “suggest that the CPI rate would have been higher around 1982, with estimates ranging from almost 11% in January and about 6.5% in December.”
The Bank of England has implemented six consecutive interest rate hikes as it seeks to curb inflation and earlier this month launched its biggest single increase since 1995 as it predicts Britain will enter its longest recession since the global financial crisis in the fourth quarter. of the year
The bank expects inflation to exceed 13.3% in October. Conservative Party leadership candidates Liz Truss and Rishi Sunak, one of whom will succeed Boris Johnson as Prime Minister on September 5 following a poll of party members, are under increasing pressure to deliver radical solutions to the crisis country’s cost of living history.
The latest forecasts suggest the UK energy price cap could rise to £4,266 ($5,170) a year early next year from its current £1,971, with many households already choosing between heating and food. The limit is expected to rise to more than £3,000 in October after the next review.
Real wages in the UK fell by an annual 3% in the second quarter of 2022, according to ONS data released on Tuesday, the steepest fall on record.
Although the average wage without bonuses increased by 4.7%, the cost of living far outstrips wage growth and reduces household income.
“Today’s inflation figures serve as a further reminder to many UK households that they are facing a period of considerable financial difficulty,” said Dan Howe, head of investment funds at Janus Henderson.
“Consumers are already struggling with rising energy costs and rising home prices, exacerbated by a lack of decisive action at the political level. Amid talk of strikes and power cuts, There is no doubt that families in the UK have difficult decisions to make.”
Richard Carter, head of fixed interest research at Quilter Cheviot, predicted the Bank of England is likely to respond at its next monetary policy meeting with another 50 basis point interest rate hike to try to combat the inflation, and said there is no doubt the cost-of-living crisis will get worse before it gets better.
“As such, there will certainly be a lot of pressure on the next Prime Minister to help soften the blow and the Bank of England will continue to have a very difficult job on its hands,” he added.