UK inflation hit another 40-year high of 9.1% in the 12 months to May. Food, energy and fuel prices continue to rise, with the inflation rate rising slightly from April’s 9% figure.
Rapid food price increases, in particular, are being largely attributed to the war in Ukraine. Both Russia and Ukraine are two of the globe’s largest exporters of wheat and maize, with Ukraine also being a major exporter of sunflower oil.
Shortages of these staples have meant a considerable price hike in bread, cereal, and sunflower oil alternatives. At the same time, the cost of meat and non-alcoholic beverages has also accelerated rapidly.
Asda has reported that shoppers are setting budgets of £30 when shopping for groceries and fuel as they try to keep their spending down.
In addition, the Chief Economist at the Office for National Statistics (ONS), Grant Fitzner, said that “widespread food price rises” had led to the fastest price rise for goods leaving factories in 45 years in May. Additionally, he commented that the prices of raw materials used for general manufacture had “leapt at their fastest rate on record”.
Fitzner caveated these statements by saying that the steep inflation rates had been neutralised by the steady price of clothing, which he says rose less this year than last, and a drop-in computer game prices.
The overall cost of living, however, remains on the rise.
The Chancellor, Rishi Sunak, has assured the public that the Tory party was “using all the tools at our disposal to bring inflation down and combat rising prices”.
He said, “I know that people are worried about the rising cost of living, which is why we have taken targeted action to help families, getting £1,200 to the eight million most vulnerable households.”
The Labour Party’s Shadow Chancellor, Rachel Reeves, has argued that the measures taken by the Conservatives are not enough. In response to Sunak’s statements, she claimed the UK needed “more than sticking plasters to get us back on course – we need a stronger, and more secure economy”.
She went on to say, “today’s rising inflation is another milestone for people watching wages, growth and living standards continue to plummet.”
“Though rapid inflation is pushing family finances to the brink, the low wage spiral faced by many in Britain isn’t new. Over the last decade, Tory mismanagement of our economy has meant living standards and real wages have failed to grow.”
The cost of borrowing money has risen with the latest interest rate increase, with new rates set at 1.25% in the fifth consecutive increase since December 2021. When inflation rates were last at 9.1%, interest rates were 13%. While interest rates are unlikely to get anywhere near double-digits in the coming years, the Bank of England could become more aggressive with future interest rate rises to try to arrest the continuous rises in living costs.