Food prices push UK inflation to new 40-year high

LONDON: Under-pressure households faced a worse-than-expected hit in July as food prices spiked and pushed inflation to another 40-year high.

Consumer Prices Index inflation (CPI) reached 10.1 per cent last month, the Office for National Statistics (ONS) revealed.

The increase was largely down to food prices and staples including toilet rolls and toothbrushes, the ONS said. The measure had been expected to reach 9.8 per cent, according to an average of analysts’ estimates calculated by Pantheon Macroeconomics.

It is the biggest jump in the cost of living since February 1982, when CPI reached 10.4 per cent, according to ONS estimates. It is also a massive jump from the 9.4 per cent inflation in June.

ONS chief economist Grant Fitzner said a wide range of price rises drove inflation up again this month. Inflation is expected to fall back a little in August; however, according to estimates it could soar to 13.3 per cent in October when the energy price cap rises again.

The Bank of England thinks this could push the UK into a recession. According to the most recent estimates by experts the price cap will reach close to £3,640 in October, up from £1,971 at the moment.

Then energy prices are expected to rise even further. On Wednesday energy consultancy Auxilione said that at today’s prices the cap might rise to £4,722 in January before hitting £5,601 in April.

Whether or not the Bank’s October prediction proves true remains to be seen. Its forecast for July’s CPI was 9.9 per cent, 0.2 percentage points behind where the ONS has now measured it.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the difference between the Bank’s forecast and the measurement is mainly down to surging food prices.

Food and non-alcoholic beverages prices increased by 12.7 per cent, the ONS said, a rise from 9.8 per cent the month before and the highest since August 2008.

The statisticians track the prices of 11 food and non-alcoholic beverage categories, and in July all of them rose.

The biggest impacts on inflation were from bread and cereals, and milk, cheese and eggs.

Shop-bought milk, cheddar and yoghurt prices “increased notably”, the ONS said. There were also smaller impacts from rising cooked ham and bacon prices, vegetables, sugar and jam, among other things.

Meanwhile, the official data showed that Retail Prices Index (RPI) inflation reached 12.3 per cent in July.

In the past this measure has been used to cap the following year’s price increases on some train tickets in England, Scotland and Wales. With inflation running away, the UK Government will keep the 2023 rises below RPI. However, it did not reveal how it plans to calculate the rises.

The Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 8.8 per cent in July, up from 8.2 per cent. Businesses are also facing pressure from soaring prices, said Alex Veitch, director of policy and public affairs at the British Chambers of Commerce.

Producer price inflation reached 22.6 per cent in July, among the highest levels since records began.