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UK inflation rises to fresh 40-year peak of 9.1% as cost of living crisis worsens – business live

UK inflation rises to 9.1%

NEWS FLASH: UK inflation has risen to 9.1% in May from 9% in April as the cost of living crisis worsens. It’s the highest since March 1982.

That’s the latest figures released by the Office for National Statistics. The ONS said rising prices for food and non-alcoholic drinks, compared with falls a year ago, pushed up the inflation rate.

Energy costs also pushed up consumer prices in May. The ONS said as wholesale gas prices quadrupled in the last year, the rise resulted in 12-month inflation rates of 53.5% for electricity and 95.5% for gas in April. These are unchanged in May.

UK inflation rises to 9.1%

NEWS FLASH: UK inflation has risen to 9.1% in May from 9% in April as the cost of living crisis worsens. It’s the highest since March 1982.

That’s the latest figures released by the Office for National Statistics. The ONS said rising prices for food and non-alcoholic drinks, compared with falls a year ago, pushed up the inflation rate.

The Covid pandemic and war in Ukraine have pushed consumer price inflation up to levels not seen in 40 years. But businesses face rising costs too. Brogan Taylor and Ryan Powell explain all in our latest blog. 👇https://t.co/wv4b8UMhlC

— ONS Focus (@ONSfocus) June 21, 2022

Low-income families in the UK’s poorest neighbourhoods are paying up to £541 a year more than affluent households to access the same basic services such as energy and insurance, and buy essential items such as TVs and fridges, according to a study, writes our social policy editor Patrick Butler.

The Fair by Design charity has called for the government and regulators to outlaw practices it says discriminate against the poorest families, costing them hundreds of pounds a year because of where they live, how much they earn, or how they are paid.

One in eight households in the UK experiences at least one type of poverty premium, paying on average £430 a year in extra costs, though it is far more prevalent in deprived areas, especially in the north and Midlands regions of England.

Britain’s cost of living crisis is being made worse by Brexit dragging down the country’s growth potential and costing workers hundreds of pounds a year in lost pay, new research claims, writes our economics correspondent Richard Partington.

The Resolution Foundation thinktank and academics from the London School of Economics said the average worker in Britain was now on course to suffer more than £470 in lost pay each year by 2030 after rising living costs are taken into account, compared with a remain vote in 2016.

In a report six years on from the referendum, the researchers said Brexit was damaging the competitiveness of UK exports on the world stage just as companies are forced to deal with the fallout from the coronavirus pandemic and Russia’s war in Ukraine pushing inflation to historic levels.

“A less open Great Britain is expected to be poorer and less productive,” it said.

Official figures due on Wednesday are expected to show a fresh rise in the inflation rate from 9% in April to 9.1% last month, as surging petrol prices and the rising cost of a weekly shop ramps up the pressure on struggling families. The Bank of England has warned the inflation rate could reach 11% by October.

Michael Hewson, chief market analyst at CMCM Markets UK, says:

Today’s main focus will be on the latest UK inflation numbers for May, as well as US Federal Reserve chair Jay Powell’s testimony to US lawmakers this afternoon.

Last week the Bank of England caused a few eyebrows to go up when they only raised the base rate by 25 basis points, while at the same time saying that they would act “forcefully” on inflation if necessary.

They then followed that up by saying they expect inflation to peak at an eye watering 11% by year end, an upgrade from its previous 10% estimate, begging the question as to what level of inflation would justify a bigger hike?

With headline inflation already at 9% this messaging merely served to showcase what a muddle the Bank of England finds itself in, and was reinforced yesterday by chief economist Huw Pill when he said that the central bank would allow growth to weaken in order to help the bank hit its 2% inflation target.

Introduction: UK inflation to rise to fresh 40-year high

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

It’s inflation day in the UK, and the latest data are expected to show another increase in the cost of living to a fresh 40-year high. Economists are forecasting that the annual inflation rate rose to 9.1% in May from 9% in April, and will push higher into double digits in coming months.

A 9.1% rate would be the highest since March 1982, almost five times the Bank of England’s 2% target. Annual inflation was last in double digits in February 1982, when it was at 10.2%. The Office for National Statistics is due to release the latest consumer price index figures at 7am BST.

Inflation is expected to reach 11% by October by the Bank of England’s own estimates.

My colleagues Niels de Hoog, Ashley Kirk and Hilary Osborne have looked at how the cost of living crisis is hammering UK households (please note that Niels’ Twitter handle is @nielsdhg).

Philip Shaw, chief economist at Investec, said:

We are forecasting the headline CPI rate to remain at 9.0%, but expect a combination of firmer food costs, higher petrol prices and another sharp hike in the energy price cap (in October) to push inflation into double figures over the coming months.

At the same time, wage growth hasn’t kept up with inflation. Annual pay growth stalled at 4% in the three months to May, according to figures from XpertHR published yesterday. The report follows a Bank of England business survey that showed employers surveyed in May were not planning a further acceleration in pay rates.

This means that the spectre of a 1970s-style “wage-price spiral” that could force the Bank of England to raise interest rates dramatically hasn’t materialised, at least so far.

National rail services will start later in the day and with reduced schedules today, owing to the knock-on effects of yesterday’s walkout when 80% of services were axed. It was the first day of the biggest rail strikes in decades. There is more misery to come for travellers though: the second day of the rail strikes is tomorrow, and the third on Saturday.

Our transport correspondent Gwyn Topham has done a handy explainer on the strikes:

Asia-Pacific markets slipped again, despite gains of more than 2% on Wall Street’s main indices. Japan’s Nikkei is down 0.05% and Hong Kong’s Hang Seng has fallen 1.15% while the South Korean Kospi lost 1.9%. European shares are also expected to open lower.

The Agenda

  • 1.30pm BST: Canada inflation for May (forecast: 7.4%)
  • 2.30pm BST: US Federal Reserve chair Jay Powell testifies to lawmakers
  • 3pm BST: Eurozone consumer confidence flash for June (forecast: -20.5)

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