Consumer price inflation in the U.K. has hit a forty-year high at 10.1 percent in the twelve months to July 2022, an increase from 9.4 percent in June; this pushes the cost of living in Britain further up, according to latest data released by the Office for National Statistics (ONS) on Wednesday.
This is the first time that the U.K. inflation has reached double digits since 1982, the ONS estimates.
The 10.1 percent consumer price inflation exceeded economists’ expectations that it would edge up to 9.8 percent.
The food and non-alcoholic beverages as well as the transport divisions made the largest upward contributions to the monthly rates in July 2022. In June 2021, the main upward contribution to the monthly rates came from transport overall, the ONS report says.
Core inflation, which excludes energy, food, alcohol and tobacco, came in at 6.2 percent in the year to July 2022, rising from 5.8 percent in June and ahead of an expected 5.9 percent.
UK inflation accelerated more than expected last month to the highest in 40 years@lizzzburden explains how that's intensifying a squeeze on consumers and putting more pressure on the government and Bank of England https://t.co/zPq4Bqr2UK pic.twitter.com/LN3K8HB709
— Bloomberg TV (@BloombergTV) August 17, 2022
Food prices drive UK inflation
Food price inflation alone hit 12.7 percent in July, the highest rate in the category for more than twenty years in the UK.
There was an overall increase of 2.3 percent between June and July 2022.
“The largest upward contributions came from bread and cereals, and from milk, cheese and eggs—where prices for shop-bought and delivered milk, cheddar cheese and yoghurts (or fromages frais) increased notably,” the report explains.
Other smaller effects came from meat, vegetables, including tubers, and sugar, jam, syrups, chocolate, and confectionery.
When it comes to energy, the report shows electricity prices rising by 54.0 percent and gas prices by 95.7 percent in the twelve months up to July 2022, leading to an unchanged contribution to the annual inflation rate of 1.87 percentage points from electricity, gas, and other fuels in total.
Energy prices are expected to rise again in October 2022.
In terms of fuel prices, those increased by 2.9 percent between June and July 2022 and by 43.7 percent in the year up to July 2022.
Heading towards lengthy recession
In the few hours following the publication of the new data, the yield on the two-year Gilt increased by more than 29 basis points to reach 2.441 percent before moderating slightly. This was the highest point since November 2008, according to CNBC.
Earlier in August, the Bank of England launched its biggest interest rate hike in 27 years as it expected headline inflation to peak at 13.3 percent in October and to remain at elevated levels throughout much of 2023.