British consumer prices rose at the fastest pace in 30 years last month, fueled by soaring costs for household energy and motor fuels the latest grim figures as inflation surges around the world.
Inflation in the United Kingdom accelerated to 7% in the 12 months through March, the highest annual rate since March 1992, the Office for National Statistics said Wednesday.
The UK faces what economists say will be the biggest drop in living standards since the mid-1950s as rocketing energy costs, rising food prices and tax increases overshadow higher wages.
People around the world are feeling the squeeze of inflation as demand rapidly bounced back from the COVID-19 pandemic and Russia’s war in Ukraine further drove up energy costs and squeezed supply chains.
In the United States, consumer prices last month jumped 8.5% from a year earlier, the fastest pace in more than 40 years, the Labor Department said Tuesday. In the 19 European countries using the euro, inflation surged to 7.5% last month, the fifth consecutive month that it has hit a record high.
In the UK, the toll of rising rising means disposable household incomes, adjusted for inflation, are expected to drop by 2.2% this year, according to the government’s independent budget adviser.
Household natural gas prices jumped 28.3% over the last year, and electricity prices rose 19.2% as the global economy recovered from the COVID-19 pandemic, increasing worldwide demand for energy.
Prices will continue to rise after Britain’s energy regulator authorized a 54% increase in gas and electricity bills for millions of households that took effect in April.
Transportation costs are also rising, with the cost of gasoline and diesel fuel rising by an average of 30.7% over the past year, the biggest increase since current records began in January 1989, the Office for National Statistics said.
Countries are moving to ease the pain from rising food, fuel and other costs by raising interest rates. The Bank of England has raised raised its key interest rate three times since December, and the U.S. Federal Reserve hiked its benchmark short-term rate last month and is expected to keep raising it, possibly aggressively.
The European Central Bank, meanwhile, has sped up its exit from economic stimulus efforts to combat inflation but has not taken more drastic steps. It meets again Thursday.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
By: Larry Elliott
According to the ONS, part of the increase in inflation as measured by the consumer prices index was caused by the bounceback in prices after they were depressed during lockdown. There were also sharp rises in the cost of secondhand cars (up 5.6%) because the supply of new vehicles has been affected by a global shortage of computer chips.
Rising oil prices led to a sharp increase in motoring costs. The annual inflation rate for motor fuels stood at 20.3% in June, the highest since 2010, after an increase in average petrol prices from 106.5 pence a litre to 129.7 pence a litre over the past 12 months. Other contributors to rising inflation included furniture (up 6.6%), women’s clothes (4.3%), bicycles (13%), books (8%) and vet bills (4.2%).
Jonathan Athow, the deputy national statistician for economic statistics at the ONS, said: “The rise was widespread, for example coming from price increases for food and for secondhand cars where there are reports of increased demand. “Some of the increase is from temporary effects, for example rising fuel prices which continue to increase inflation, but much of this is due to prices recovering from lows earlier in the pandemic.
An increase in prices for clothing and footwear, compared with the normal seasonal pattern of summer sales, also added to the upward pressure this month.” Samuel Tombs, the chief UK economist at the consultancy Pantheon Macroeconomics, said businesses were seeking to take advantage of strong consumer demand after the relaxation of Covid-19 restrictions.
“The rise in the core rate in June was driven by increases in clothing inflation to 3.0%, from 2.1% in May, and catering services inflation to 2.2%, from 1.4%. In addition, a jump in secondhand cars inflation to 5.5%, from 0.9%, boosted the headline rate by 0.08 percentage points.”
Britain is not alone in experiencing stronger price pressures during a period marked by strong post-lockdown growth. Earlier this week the US reported that its inflation rate had hit a 13-year high of 5.4%. Analysts expect further increases over the coming months before it starts to come down again.
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