The UK’s inflation in July reached 10.1 percent, hitting another 40-year high, official figures show.
The measure had been expected to reach 9.8 percent, 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 percent, according to ONS estimates.
The CPI including owner occupiers’ housing costs (CPIH) surged by 8.8 percent in the 12 months to July, up from 8.2 in June.
The ONS said the rise in food prices was the largest driver in the monthly change of both the CPI and CPIH, and the largest upward contributions to the annual CPIH inflation rate came from the prices of energy, owner occupiers’ housing costs (OOH), and motor fuels as well as food.
Food and non-alcoholic beverage prices increased by 12.7 percent, the ONS said, a rise from 9.8 percent the month before and the highest since August 2008.
ONS chief economist Grant Fitzner said inflation was driven up by “a wide range of price rises.”
“Food prices rose notably, particularly bakery products, dairy, meat, and vegetables, which was also reflected in higher takeaway prices,” he said.
“Price rises in other staple items, such as pet food, toilet rolls, toothbrushes, and deodorants, also pushed up inflation in July.
Fitzner said the prices for package holidays and flight tickets also went up thanks to higher demand, adding, “The cost of both raw materials and goods leaving factories continued to rise, driven by the price of metals and food respectively.”
It’s expected to fall back a little in August. However, according to estimates, it could soar to 13.3 percent in October when the energy price cap rises again.
The UK’s energy regulator the Office of Gas and Electricity Markets (Ofgem) earlier said it will revise its price cap—the maximum price energy suppliers can charge for per unit of energy—every three months instead of every six months due to the volatility in the global energy market.
The next change is expected to be announced later this month and take effect in October.
According to the most recent estimates published by energy consultancy Auxilione on Wednesday, the energy price cap—calculated based on typical annual energy consumption—may rise to £3,639 a year in October, almost double the current figure (£1,971).
The figure is estimated to keep ballooning to £4,722 in January next year and £5,601 in April, before falling back down after July.
The UK’s economy in the second quarter of 2022 is estimated to have shrunk by 0.1 percent. The Bank of England thinks rising energy costs could 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 percent, 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.
Chancellor of the Exchequer Nadhim Zahawi said it is his “top priority” to control runaway inflation.
“I understand that times are tough, and people are worried about increases in prices that countries around the world are facing,” the chancellor said.
“Although there are no easy solutions, we are helping where we can through a £37 billion support package, with further payments for those on the lowest incomes, pensioners, and the disabled, and £400 off energy bills for everyone in the coming months,” he said.
“Getting inflation under control is my top priority, and we are taking action through strong, independent monetary policy, responsible tax and spending decisions, and reforms to boost productivity and growth.”
Shadow chancellor Rachel Reeves said, “We must get a grip on rising inflation leaving families worried sick about making ends meet.
“Labour’s fully-costed plan to freeze the energy price cap will bring inflation down this winter, easing the burden on households and businesses,” she said, referring to Labour’s call for a freeze in the energy price cap for six months and the extension of the 25 percent windfall tax on the profit of energy companies to fund the plan.
“It will mean that households won’t pay a penny more for their energy bills this winter,” Reeves said. “People are worried sick and while the Tories are busy fighting and ignoring the scale of this crisis.”
Liz Truss, one of the two candidates vying to be the next Conservative Party leader and prime minister, said it’s “wrong to just keep sticking plasters on this problem” and that her priority is cutting taxes and boosting the production of gas, nuclear, and other forms of renewable energy.
Truss’s opponent Rishi Sunak said he will rule out extending the windfall tax which he introduced earlier this year as the chancellor, saying he doesn’t think it’s the right approach.
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