Image Source: Bloomberg
Due to rising fuel and food prices, inflation are still rising at their quickest rate in more than 40 years.
The rate of price growth in the UK increased from 9.1 percent in May to 9.4 percent in the 12 months that ended in June, according to the Office for National Statistics (ONS).
According to the ONS, milk, cheese, and eggs prices increased in addition to the 18.1p per liter increase in gasoline prices in June.
The growing cost of living is eating into household budgets, and unions have been requesting pay increases to assist workers cope.
The rate of price growth is referred to as inflation. For instance, if a bottle of milk costs £1 and goes up by 5p from a year ago, milk inflation is 5 percent.
The conflict in Ukraine and efforts by the European Union to lessen its reliance on Russian oil have caused fuel prices to surge in recent months.
According to the ONS, the average price of gasoline in June was 184p per liter, which was up from 129.7p in May and the highest price since records began in 1990. The highest monthly increase in history also occurred.
According to the ONS, the average diesel cost for June was 192.4p a liter, another record high.
According to the RAC, it caused the cost of fuel for the aforementioned average family car to exceed £100. In addition, the AA stated this week that although prices at the pumps are now less expensive than last year, wholesale gasoline costs are still significantly higher.
Food expenses have been rising everywhere, with the pace of increase being the fastest since March 2009.
According to the most recent data, milk, cheese, and egg costs witnessed the largest increase in June. Prices of vegetables, meat, and ready meals all increased.
According to research firm Kantar, average grocery price increases this year are expected to be £454. In addition, a typical household’s annual energy costs increased by an astounding £700 in April, and another increase is expected in October.
According to the ONS, the cost of eating out and staying in a hotel grew by 8.6 percent in the year ending in June.
Many of the same global forces that are affecting the UK are also causing a squeeze in living expenses in other nations.
The UK’s inflation rate is currently greater than that of the US and other European countries, with the most recent estimates of annual inflation for Germany and France both coming in at 8.2 percent and 6.5 percent, respectively.
According to Capital Economics consultant Paul Dales, the two primary sources of inflation worldwide are rising energy prices and a lack of labor.
Additionally, he noted that EU governments have “done more to prevent” households from paying increased wholesale gas and electricity prices.
Although the labor market in the UK was “just as tight as in the US,” it seemed like UK workers were “better able to bargain for higher wages,” which could lead to additional inflation.
The inflationary pressures on the economy are no longer simply international; they now exist domestically, as Bank of England Governor Andrew Bailey stated in his Mansion House speech on Tuesday night. As a result, the labor force has decreased, making hiring new workers and raising pay more difficult.
Of the advanced G7 countries, the UK already has the highest headline inflation rate. However, in the race for the Conservative leadership, the Bank of England has also received a lot of criticism.
However, despite being more directly influenced by government action, labor shortages are seldom mentioned in the leadership debate.
The discussion with public sector employees will become much tenser as inflation rates rise. Next month, base interest rates are expected to climb by half a percentage point, which would be the largest increase in over three decades.
Bank of England Warns of Further Inflation
According to the Bank of England, inflation is expected to hit 11% this year.
According to Bank of England Governor Andrew Bailey, rates may increase by as much as 0.5 percentage points at its upcoming rate meeting in August in an effort to slow the rate of price growth. They would then reach 1.75 percent.