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Inflation in the UK reached a 40-year high of 9.1% in May as food and energy prices continue to increase.
Consumers are struggling with the surge in prices of commodities which has taken a toll on the cost of living. The consumer price index released on Wednesday revealed the 9.1% as inflation persists across all states in the UK. The increase corresponds with economists’ predictions in a Reuters poll. However, the inflation level is a bit higher than the previous record of 9% in April.
More so, consumer prices in May were up 0.7% month-over-month. The monthly jump was slightly above the 0.6% expectations. However, the most recent rate indicates that UK inflation is gradually slowing down, as there was a 2.5% monthly increase back in May. While announcing the UK inflation figures for May, the Office for National Statistics noted that the last time inflation was as high as this was in 1982. At the time, estimates were around 11% and 6.5% between January and December.
UK Inflation Report for May Raises More Concern
The inflation rate is worrisome, and housing and household services are the major contributors to the increases. These housing services include gas, electricity, etc. Also, the Consumer Prices Index, such as owner’s occupiers’ housing costs (CPIH) came in at 7.9% in the 12 months to May, up from 7.8% in April. UK residents are now paying more than 50% over their previous energy bills. The UK’s energy regulator added 54% to the household energy price cap beginning on the 1st of April.
The UK’s Office for National Statistics reported:
“Rising prices for food and non-alcohol beverages, compared with falls a year ago, resulted in the largest upward contribution to the change in both the CPIH and CPI 12-month inflation rates between April and May 2022 (0.17 percentage points for CPIH).”
Last week, the Bank of England announced the fifth consecutive hike in interest rates. The Bank targeted controlling the ongoing inflation without worsening the current economic downturn. Expectedly, the Bank said CPI inflation would exceed 11% by October this year. Meanwhile, the current rate is at 1.25%, a 13-year high.
Portfolio manager at Quilter Investors, Paul Craig, said the inflation report reiterated the challenges government, business, the Central Bank, and consumers face. He stated that the current crisis affecting the cost of living in the UK is not ending anytime soon. He said inflation leaves the Bank of England in a difficult position. Craig added:
“While the U.S. has acknowledged the need to go hard and fast on interest rates, the Bank of England continues to plod along at a slower pace, trying not to tip the economy into recession at a time when businesses and consumers are feeling the pinch.”
The portfolio manager is concerned with the UK inflation jump in May and desires swift intervention by the government.