Inflation to hit 40-year high as unemployment rate rises
Last month’s painful gas and electricity bill rises are expected to send UK inflation surging to a fresh 40-year high in today’s official figures, but experts predict this is likely to mark the peak in the cost of living crisis.
Most economists forecast that the latest data from the Office for National Statistics (ONS) will show Consumer Prices Index
(CPI) inflation jumping to 10.7 per cent last month from 10.1 per cent in September. It would mark the highest level of inflation since January 1982.
The government promised in September that no household in the UK would pay more than 34p per unit of electricity and 10.3p for every unit of gas that they used. For the average family, this would mean bills would reach around £2,500 per year, but households that used a lot of energy could pay more and people could reduce their bills by using less.
Before the energy price cap support, the Bank of England had warned that inflation could surge to 13.3 per cent in October, with estimations at the time that Ofgem’s price cap would skyrocket to around £3,450 without any government help. The support was announced under former prime minister Liz Truss, and was initially meant to last for two years. This was later reduced by chancellor Jeremy Hunt to six months, after which it will be reviewed.
Ellie Henderson at Investec Economics said: “Although the headline rate of inflation is unlikely to be a pleasant read, comfort may be taken that on our forecasts it could represent the peak. We envisage that price growth will slow from here, dragged down as economic momentum slows. Helping this is that the sharp increases in energy price inflation are likely to be behind us.”
It was also revealed that Britain’s rate of unemployment has risen unexpectedly amid mounting signs of a cooling jobs market as the UK heads for a painful and prolonged recession. Official figures showed the rate edged up to 3.6 per cent in the three months to September from 3.5 per cent in the three months to August, while vacancies fell for the fifth time in a row as employers rein in recruitment due to the building economic gloom. It hit 3.8 per cent in September alone, the highest monthly reading since April.
Wages also continued to be far outstripped by rocketing prices, despite the fastest growth in pay packets for 22 years as the cost of living crisis hit hard. The ONS said average earnings
excluding bonuses fell 3.8 per cent when taking account of CPI, even with a 5.7 per cent rise in regular pay – the fastest growth since 2000, excluding the pandemic, when the end of furlough skewed figures.
The data showed more people dropped out of the workforce, with a hike in the proportion of people neither looking for work nor working. More than half a million working days were lost to strikes in August and September – the highest two-month total in more than a decade – the ONS also revealed.
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