UK inflation hits 41-year high of 11.1%

In October, inflation in the United Kingdom reached a 41-year high of 11.1%, exceeding expectations as food, transportation, and energy prices continued to squeeze households and businesses.

This was disclosed by the  Office for National Statistics on Wednesday. The jump was higher than the Bank of England’s forecast for inflation to peak at 10.9% and more than five times the central bank’s 2% target.

Contributing factors: The report stated that rising food prices also made a large upward contribution to the change with transport (principally motor fuels and second-hand car prices) making the largest, partially offsetting, downward contribution to the change in the rates

In October, the sharp rise in the cost of living was caused by higher gas, electricity, and food prices despite the government’s energy price guarantee, which capped bills for gas and electricity at £2,500 for a household with average usage of both fuels.

• The report said, “CPIH rose by 1.6% in October 2022, compared with a rise of 0.9% in October 2021.” The Consumer Prices Index (CPI) rose by 11.1% in the 12 months to October 2022, up from 10.1% in September 2022. CPI rose by 2.0% in October 2022, compared with a rise of 1.1% in October 2021.
• “Despite the introduction of the government’s Energy Price Guarantee, gas and electricity prices made the largest upward contribution to the change in both the CPIH and CPI annual inflation rates between September and October 2022,” the report added. 

For the record: Inflation would have been 13.8% had the government not introduced an energy price guarantee that limited the increase, the ONS said.

• Wage growth is lagging the increase in prices, delivering the sharpest squeeze in living standards in memory and putting pressure on Prime Minister Rishi Sunak’s government to act.
• The inflation rate for low-income households was 11.9% compared with 10.5% for more wealthy ones.
• Food price inflation rose sharply to 16.5% on an annual basis, the highest for 45 years, according to the ON.