Sat. Dec 3rd, 2022

News: inflation in the UK reached 11.1%

Inflation in the UK has hit a new 40-year high – even higher than expected.

The UK’s annual inflation rate rose to 11.1% in October, after millions of households were hit by higher energy bills.

That’s up from 10.1% in September, as the cost-of-living crisis escalates, and still above the Bank of England’s 2% target.

The consumer price index including owner occupiers’ housing costs (CPIH) rose by 9.6% in the 12 months to October 2022, up from 8.8% in September.

The CPI rose by 11.1%, compared to 10.1%.

These increases were driven by gas and electricity prices.

➡️ https://t.co/xlVI9UpAdp pic.twitter.com/5Viqzc65zR

— Office for National Statistics (ONS) (@ONS) November 16, 2022

Key events

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This latest spike in inflation will leave families “incredibly worried”, the shadow chancellor points out Rachel Reeves:

NEW: Inflation rose to 11.1% – the highest level in 40 years. This will leave families incredibly worried.

We feel the powerful impact of low growth and high inflation in Britain so keenly because 12 years of Tory economic failure have left us exposed.

Labor will secure our economy and develop it.

— Rachel Reeves (@RachelReevesMP) November 16, 2022

Hunt: We can’t have long-term growth with ‘insidious’ high inflation.

Jeremy Hunt blamed the impact of the pandemic and Vladimir Putin’s war in Ukraine for the rise in inflation in October.

Calling inflation an ‘insidious tax’ (as he did yesterday), the chancellor also warned that “tough” decisions on tax and spending would be needed in Thursday’s autumn statement.

The extra austerity will hit growth, at a time when the UK is already entering recession.

Hunt, however, argues that “we cannot have long-term, sustainable growth with high inflation.”

“Covid aftershock and Putin’s invasion of Ukraine raise UK and global inflation,”

“This insidious tax eats away at paychecks, household budgets and savings, while nixing any chance for long-term economic growth.

“It is our duty to assist the Bank of England in their mission to return inflation to target levels by acting responsibly towards the national finances. This requires some tough but necessary tax and spending decisions to balance the books.

“We cannot have long-term, sustainable growth with high inflation. Tomorrow I will present a plan to reduce debt, achieve stability and reduce inflation while protecting the most vulnerable.”

The rise in prices in October means that workers are suffering deeper pressure on real wages.

Yesterday we learned that average earnings (excluding bonuses) rose 5.7% in the year to September, the fastest growth since 2000 – but well behind inflation.

Public sector workers were the worst affected – their average salary increased by only 2.2 percent.

Here Grant Fitznerchief economist in State Office of Statisticsexplaining how rising energy bills and food prices have pushed inflation to 11.1%.

“Rising gas and electricity prices have driven overall inflation to its highest level in more than 40 years, despite the Energy Price Guarantee.

“During the last year, gas prices rose by almost 130%, while electricity prices rose by around 66%.

“Increase in a range of food items also fueled inflation.

“This was partially offset by motor fuels, where average gasoline prices fell on a monthly basis, while the price of diesel rose, bringing the price gap between the two fuels to the highest level on record.

Gasoline prices fell by 0.5 percent in October, but are still about 18 percent more expensive than a year ago.

The average price of petrol and diesel was 163.6 pence and 183.9 pence per liter respectively in October 2022, compared with 138.6 pence and 142.2 pence per liter a year earlier.

Petrol prices fell by 2.9p per liter on the month, while diesel prices rose by 2.3p per litre.

Food inflation the highest since 1977

UK households have been hit by the biggest rise in food prices in 45 years.

Food and non-alcoholic drink prices rose by 16.4% in the 12 months to October 2022, up from 14.6% in September 2022.

This is the highest since September 1977, the ONS estimates.

Food inflation in the UK
Food inflation in the UK Photo: ONS

ONS explains:

The biggest upward effect came from milk, cheese and eggs, where the prices of purchase milk and cheddar cheese rose between September and October 2022, but more than between the same two months in 2021.

Inflation would reach 13.8% without the energy price guarantee

Without the Liz Truss price cap, annual UK inflation would have risen to 13.8% rather than 11.1%.

The Office for State Statistics says:

As a rough estimate, without EPG implementation [Energy Price Guarantee]the prices of electricity, gas and other fuels would increase by almost 75% between September and October 2022 (instead of 25%).

The EPG meant average bills rose by £2,500 a year – although it was there is no limit how high the bills could go. Without it, Ofgem would raise the price cap to an average of £3,549, up from £1971.

UK ONS: WITHOUT ENERGY PRICE GUARANTEE, CPI INFLATION WOULD BE ABOUT 13.8% IN OCTOBER.

— Latest market news ⚡️ (@financialjuice) November 16, 2022

Gas and electricity prices made the biggest upward contribution to inflation, despite the government’s energy price guarantee.

Rising food prices it also made a large upward contribution to inflation, says the ONS.

News: inflation in the UK reached 11.1%

Inflation in the UK has hit a new 40-year high – even higher than expected.

The UK’s annual inflation rate rose to 11.1% in October, after millions of households were hit by higher energy bills.

That’s up from 10.1% in September, as the cost-of-living crisis escalates, and still above the Bank of England’s 2% target.

The consumer price index including owner occupiers’ housing costs (CPIH) rose by 9.6% in the 12 months to October 2022, up from 8.8% in September.

The CPI rose by 11.1%, compared to 10.1%.

These increases were driven by gas and electricity prices.

➡️ https://t.co/xlVI9UpAdp pic.twitter.com/5Viqzc65zR

— Office for National Statistics (ONS) (@ONS) November 16, 2022

‘Uncertain way forward’ as inflation fuels cost of living crisis

UK CPI inflation is forecast to remain in double digits in October Oliver rust collector of economic data Truffle.

The path ahead remains uncertain as the pace of inflation adds to already high prices and prolongs the severe cost of living crisis across the UK.”

“At Truflation we believe that UK inflation is set to peak early next year; however, this depends on the continued decline in energy prices over the winter. With the continued fiscal tightening of the UK economy, we should see inflation decelerate for the rest of this year, and we should see unemployment rise in 2023 as demand within the economy softens

The easing of inflation depends on natural gas prices remaining less high during the winter months and on the renewal of the UK grain agreement between Ukraine and Russia.”

There are hopes that UK inflation could peak this autumn and fall in 2023.

Ellie Henderson on Investec economy He said:

“While the headline inflation rate is unlikely to make pleasant reading, it can be comforting that according to our forecasts it could represent a peak.

“We anticipate that price growth will slow from now on, pulling downward as economic momentum slows.

“This is helped by the fact that the sharp increase in energy price inflation is likely to be behind us.”

Introduction: UK Inflation Report in Focus

Good morning and welcome to our continuing coverage of business, financial markets and the world economy.

Inflation in the UK is expected to hit its highest level in 40 years today, after households were hit by a jump in gas and electricity bills.

Economists forecast that October’s consumer price index, due out at 7am, will show that prices rose 10.7% in the past year. That would be the highest level of inflation since January 1982, up from 10.1% recorded in September.

Inflation in the UK to September 2022

Inflation was fueled by the rise in wholesale energy prices following the Russian invasion of Ukraine.

Household electricity bills rose in October when the energy price cap was lifted – although the Liz Truss government has capped the rise, meaning average bills will rise to £2,500 a year rather than nearly £3,500.

Food inflation has also skyrocketed, pushing supermarket inflation to almost 15% according to data provider Kantar.

Michael Hewson from CMC Markets explains:

These increases in food prices look set to translate into an even higher October reading of 10.7% later today, with the lifting of the energy price cap also expected to act as a tailwind.

The rise in basic prices is also becoming a bigger problem, despite the stabilization of energy prices in recent months.

Having raised interest rates by 75 basis points last month, the Bank of England will be hoping we don’t move too much above the 6.5% we saw in September.

We will hear the Bank of England’s latest stance on inflation when Governor Andrew Bailey gives evidence to the Finance Committee this afternoon, alongside peers Ben Broadbent, Swati Dhingra and Catherine Mann.

Daily agenda

  • 7am GMT: UK Consumer Inflation Report for October

  • 7am GMT: UK PPI Factory Inflation Index for October

  • 9am GMT: European Central Bank publishes financial stability review

  • 9.30 GMT: UK house price index for September

  • 9.30 GMT: UK Rental Price Index for October

  • 14.15 GMT: Finance Committee hearing with the Bank of England