UK inflation rises to highest level in almost 30 years at 5.4%

[dutchman]

Statisticians said the fall was driven by food prices, which were almost unchanged on a monthly basis compared with a “large rise” the previous year.

Yeah, right. Someone forgot to tell Morrisons, Aldi and the local chip shop!

[rebbonk]

Haven't the items used to determine inflation just been 'amended'? If I'm right, this particular figure is not exactly very meaningful.

[dutchman]

Big drop in UK inflation rate disguises more disappointing details



The annual inflation rate fell sharply in April. Prices are rising more slowly than at any time in almost three years. Inflation is lower in the UK than it is in the EU.

Even so, the latest bulletin on the cost of living from the Office for National Statistics was mildly disappointing. April’s inflation figure was always going to be good, with a sharp fall guaranteed by the fact the energy price increases of a year earlier were not repeated.

But at 2.3%, the number was slightly higher than expected. The consensus among economists polled by Reuters was 2.1%. Some had even predicted it would drop below the government’s 2% target.

The main reason for the fall from 3.2% in March was the continuing downward trend in household energy bills. According to the ONS, prices of electricity, gas and other fuels were 27.1% lower this April than in April 2023, the sharpest decline since records began in 1989. Food price inflation was also down – from 4% to 2.8%.

These developments are helpful for poorer households, which spend a bigger share of their income on heating, lighting and putting food on the table.

But there was also some less good news. Core inflation – which strips out food, energy, tobacco and alcoholic drinks – fell from 4.2% to 3.9%, rather than the 3.6% expected. Even more worryingly, inflation in the services sector – which is closely monitored by Bank of England interest rate setters – barely budged, falling from 6% to 5.9%.

One reason for that appears to be that businesses passed on at least some of the higher costs from the higher national living wage, which went up from £10.42 to £11.44 last month, to their customers. Inflation in the hotels and restaurants sector – parts of the economy with a heavy concentration of minimum-wage workers – rose last month from 5.8% to 6%.

The Bank’s monetary policy committee will be paying a lot more attention to services inflation than they will to the headline 2.3% figure because it thinks it is a reasonable guide to price pressures generated by the domestic UK economy.

Rob Wood, the chief UK economist at Pantheon Macroeconomics, said there were plenty of examples of sticky service inflation: accommodation, water bills, air fares, catering, and recreation and cultural services all experienced hefty price increases last month. “Upside surprises elsewhere were widespread, not focused in a few erratic components,” he said.

Paul Dales, the chief UK economist at Capital Economics, had been predicting a much bigger fall to 5.2% in services inflation in April, and says the much smaller decrease will affect the timing of cuts in official borrowing costs.

“Even though there is still a wages and an inflation release to go before the Bank of England meeting on 20 June, it feels as though a cut then now seems very unlikely. Even a cut in August is looking a bit more doubtful,” he said.

[dutchman]

According to the ONS, prices of electricity, gas and other fuels were 27.1% lower this April than in April 2023

My electric bill just went UP!

It WAS £140 a month, it's now £160.

[rebbonk]

Having worked professionally with the ONS - They stink!

[dutchman]

UK inflation hit Bank of England’s 2% target in May

Inflation has hit the UK’s 2 per cent target for the first time in three years, delivering a fillip to Prime Minister Rishi Sunak as he seeks to turn around his struggling election campaign.

The figure marks a milestone for the UK economy following the worst inflationary upsurge in a generation. The Bank of England last hit its 2 per cent inflation target in July 2021.

The data also puts the UK ahead of the US and the Eurozone in the race to tame inflation. The price pressures confronted by the US Federal Reserve and the European Central Bank still remain above the target, which is shared by the major central banks.

The Office for National Statistics figure for CPI growth in May was in line with a forecast of economists polled by Reuters and down from April’s rate of 2.3 per cent, driven lower by food and non-alcoholic beverages, recreation and furniture prices.

Next time you go shopping, offer the shop 2% more than they were charging last year, see what their reaction is?

At least we now know why Sunak called the election for July 4th (I think?), there won't be enough time to report June's figure which will almost certainly show the rate rising again (amongst other horrors).

[rebbonk]

According to the BBC (!) food prices are 25% higher than they were in 2022.

Prices need to fall, not continue rising just at a slower rate. - Many people fail to understand what an inflation rate of 2% actually means.

[dutchman]

According to the BBC (!) food prices are 25% higher than they were in 2022.

They're at least 50% higher on a like-for-like basis.

How they fiddle the statistics is by substituting cheaper and often inferior brands for the ones originally measured and by comparing bulk-buy offers with individual items.

[rebbonk]

I've noticed that the cat food I buy has not only increased in price, but has shrunk in content by about 15%. A dirty trick, but one that many people don't notice.

[dutchman]

Revealed: how UK’s poor paid price of ‘cheapflation’ in cost of living crisis



The bill for a weekly shop in Britain’s poorest households rose by far more than it did in wealthy homes during the height of the cost of living crisis as the sharpest price increases affected cheaper brands, research reveals.

The study by the Institute for Fiscal Studies (IFS) found the least well-off had been hardest hit by “cheapflation” in the 2021-23 period – paying 29.1% more for their food, compared with 23.5% for better-off households.

The report, which lays bare the disproportionate impact of rising food prices on the poor, has been released to coincide with the latest cost of living figures from the Office for National Statistics.

The data showed Britain’s annual inflation rate rose to 2.2% last month – its first increase since December last year – as domestic energy bills fell by less than in July 2023.

The IFS said grocery items that were among the cheapest 10% in each spending category, including staples such as milk, pasta and butter, rose by 36% over the two years to last September, while more expensive versions of the same items rose by just 16%.

Hard-up consumers had responded to the squeeze on living standards by switching to bargain brands that were experiencing the biggest price rises, the IFS found.

In what it said was an “unprecedented” disparity in inflation rates across income classes, the IFS calculated that if the poorest 25% of households had faced the same inflation rate for groceries as the richest 25% their annual food bills would have been cut by £100. No equivalent 24-month period in recent times had seen such high differences in the inflation rates of these two groups.

Tao Chen, an IFS research scholar, said: “Widespread ‘cheapflation’ pushed up the prices of the most inexpensive varieties of grocery products … this hit poorer households harder.”

The study covers the two-year period when inflation was sent soaring by the easing of Covid-19 lockdowns, supply-chain bottlenecks and Russia’s invasion of Ukraine. Prices overall rose by 15.7% between September 2021 and September 2023, with food and drink prices increasing by 28.4%.

The annual inflation rate peaked at 11.1% in October 2022 – its highest level in four decades – but had since fallen back, and for May and June it was at the government’s 2% target.

However, City economists had been predicting that the rate would start to climb again, with the Bank of England policymaker Catherine Mann warning on Monday that the battle against inflation was “far from over”.

During the peak of the cost of living crisis, a campaign by the food writer and activist Jack Monroe prompted the ONS to provide a more detailed breakdown of the impact of rising prices on different income groups.

Monroe had exposed how many budget lines had disappeared from supermarket shelves, forcing households to switch to less affordable versions, pushing up their food bills and fuelling hunger and poverty.

The IFS said that while official statistics showed poorer households experiencing higher inflation during the cost of living crisis, they did not reflect differences in the prices of own-brand versus premium varieties and were therefore likely to understate differences in the inflation rates of rich and poor in times of rising inflation.

Chen said individual households would almost always experience a different rate of inflation to headline numbers, such as the official consumer prices index, because these measures were based on average consumer spending patterns across the economy. “Our research shows that it’s important to take account of differences in the products people buy at a very fine level to detect differences in how they are being affected by the rising cost of living.”

Patterns of grocery shopping vary but the IFS said the disparity between inflation rates could not be explained by how much consumers spent on one category of food as opposed to another.

“Differences in the rates of inflation across cheaper and more expensive varieties of the same product categories accounted for all of the difference in the inflation rates experienced by rich and poor households for grocery products over this period,” the thinktank said.

It added that the fact that food prices rose more than other prices meant poorer households – who devote more of their spending to food – suffered higher inflation rates over the 2021-23 period than headline figures would suggest.

Many people shifted towards cheaper varieties of goods over this period to deal with the rising cost of living. The share of household spending devoted to products that were initially among the cheapest 10% rose by 2.2 percentage points from the third quarter of 2021 to the third quarter of 2023.

The IFS said the UK was not alone in seeing food prices rise significantly more for the poor than for the rich. “Recent evidence suggests that the immediate post Covid-19 pandemic period bore witness to cheapflation in a number of countries,” it said. “This raises the possibility that cheapflation has fuelled inflation and cost of living inequality in many countries. It also remains to be seen whether this pattern will persist in periods of more general price stability.”