U.K. PRICES RISE THE FASTEST IN 30 YEARS
Energy, transportation and food squeezed household incomes
Consumer prices in the United Kingdom have risen at the fastest pace in almost 30 years as higher costs for energy, transportation, food and furniture squeezed household incomes.
Inflation accelerated to 5.4 percent in the 12 months through December, up from November’s 5.1 percent, the Office for National Statistics said Wednesday.
Last month’s annual figure is the highest since March 1992, when inflation stood at 7.1 percent.
Economists warned that inf lation is likely to rise further in the coming months as tax increases and the full impact of a recent surge in energy prices hit consumers.
Gas and electricity bills for millions of households are expected to balloon by 50 percent or more in April when a semi-annual adjustment in the energy price cap takes effect.
“What is of particular concern is that the change from November has come mainly from an increase in the price of food,” said Kitty Ussher, chief economist for the Institute of Directors. “Not only does this provide additional evidence that inflation is becoming endemic rather than transitory, it also bodes ill for households facing multiple rises in the cost of living this spring.”
Prices are rising in many countries as the global economy recovers from the coronavirus pandemic, boosting demand for energy and other raw materials and driving wages higher.
U.S. consumer prices rose 7 percent in the 12 months through December, pushing inflation to the highest level in nearly 40 years. It accelerated last month to a record 5 percent in the 19 European Union countries that use the euro.
While prices are rising at the fastest pace in decades, inflation remains well below the levels of the early 1970s when a global energy crisis triggered double-digit increases.
The latest U.K. figures will increase pressure on the government to shield low-income families from price increases.
Critics have called on Prime Minister Boris Johnson to provide more help with fuel bills and rethink a temporary 1.25 percent income tax increase to boost funding for the National Health Service and social care.
Soaring energy prices, supply chain backups and other issues led the Bank of England to raise interest rates last month for the first time in more than three years, increasing costs for borrowers.
The central bank, which tries to keep inflation below 2 percent, raised its benchmark interest rate to 0.25 percent from a record low 0.1 percent.
Shafiq Shabir, head of electronic trading at the broker Intertrader, said that interest rates may climb to 1 percent by the end of this year following the inflation figures that he called “eye-watering.”
“Wage growth is expected to sit at 4.5 percent for 2022, meaning many will see their real-term incomes fall behind the increasingly tight cost of living.”