Rising food prices pushed UK inflation back into double digits in September, making the economy vulnerable as we head into winter.
The consumer price index rose 10.1 percent last month from 9.9 percent the previous month, the Office for National Statistics said on Wednesday. That equaled a 40-year high hit in July and beat economists’ expectations for 10 percent.
The numbers leave inflation well above the Bank of England’s 2% target, keeping pressure on policymakers to raise interest rates significantly next month. The danger is that prices will pick up again early next year after the government eased its support for household energy bills.
“I understand families across the country are struggling with rising prices and higher energy bills,” Chancellor of the Exchequer Jeremy Hunt said in a statement. “This government will prioritize aid to the most vulnerable.”
The pound fell following the report, falling as much as 0.3 percent on the day to $1.1286.
Food prices rose 14.8 percent year-on-year, also the sharpest rise in more than 40 years, according to the ONS. Furniture and housewares were another driver, rising 10.7 percent in September.
“These increases were partially offset by the continued decline in fuel costs, with airfares falling more than usual for this time of year and used car prices also rising less than last year’s large increases,” said Darren Morgan, director of economic statistics at the ONS .
There were also signs of more persistent inflation at the wholesale level. Producer prices, which measure the cost of goods leaving factories, rose 15.9 percent in September from a year earlier. That was slower than the previous month but slightly above expectations. Commodity prices rose 20 percent, also above expectations.
September’s inflation data has traditionally been used to augment an annual increase in welfare payments beginning the following April. It also feeds calculations of how much state pensions will rise, though Chancellor Jeremy Hunt has yet to commit to using this year’s figure.
Rising prices have depressed consumer spending power by the most in decades, leading to a slump in poll numbers for Prime Minister Liz Truss’s government. While she introduced generous subsidies for household energy bills and tax cuts to boost growth, a market crisis forced her to reverse many of these measures, leaving the question of how ministers will act.
Meanwhile, cuts in subsidies for electricity and natural gas bills will expose consumers to rising prices in energy markets early next year. UK inflation could peak at around 10.7 percent this year but rise to 12 percent in April if the government fails to stem rising energy costs, Bloomberg Economics estimates.
https://www.independent.ie/business/world/uk-inflation-returns-to-double-digits-as-food-prices-soar-42078303.html UK inflation returns to double digits as food prices rise