Prices continue to rise at the fastest pace in 40 years, with food costs rising, especially for bread, cereal, and meat.
The rate at which prices go up in the UK increased by 9.1% in the 12 month to May from 9% in April. This was according to the Office for National Statistics (ONS).
Inflation is driven by fuel and energy prices, but the ONS stated that food costs have pushed it higher.
Unions and workers are pushing for higher wages to deal with rising prices.
The government warns employers against giving big raises in salaries to employees. This is because they fear an “inflationary spiral” that would see firms increase wages and then pass on the increased cost to their customers via higher prices.
Inflation is currently at its highest point since March 1982, when it was 9.1%. The Bank of England warned that it could reach 11% in the coming year.
Inflation refers to the rate at which prices rise. If a bottle costs PS1 but rises 5p over a year, then milk inflation would be 5%.
A BBC-commissioned survey of over 4,000 people found that 82% believed their wages should rise to meet the rising cost of goods and services.
In April, households were subject to an unprecedented PS700-per-year rise in energy costs. Fuel price increases in June have meant that it now costs more than PS100 for a family car to be filled with petrol.
On Tuesday, rail workers staged a walkout, causing major disruption. Further strikes were planned for Thursday, Saturday, in dispute over pay, job security, and working conditions.
Rail, Maritime and Transport unions are calling for a 7% pay increase, while employers offer a maximum of 3%.
Unison, which represents workers in the public sector, accuses ministers of “living and breathing on another planet” because of “talks about public sector pay restraint”.
Assistant general secretary Jon Richards stated that staff are desperately in need of a pay increase to match runaway prices because they work under pressure in health, education, and school services.
The largest teachers’ union warns of possible industrial action over pay.
The National Education Union has criticized government proposals for a 3% increase in the pay of most teachers in England and called for an “inflation plus” increase for all teachers.
Dominic Raab, however, said to BBC’s Today that “we have to stop making it worse by fueling pay demands that will only cause inflation stay higher for longer and hurt the poorest the most.”
According to the ONS, inflation was fueled by rising food and non-alcoholic beverage prices in May.
Russia’s war against Ukraine has severely limited wheat and maize supply, which are used for bread and cereals from two of the largest exporters in the world.
Ukraine is also a major sunflower oil producer, which means that the prices of other alternatives have risen.
Kantar, a market research company, has predicted that the UK’s average grocery bill will rise by PS380 in 2018.
According to Supermarket Asda, shoppers are setting PS30 limits at petrol pumps and checkouts. Customers are switching to budget ranges or putting less into their baskets.
Grant Fitzner is the chief economist of the ONS. He stated that “widespread price rises” had meant that the cost for goods left factories in May rose at the fastest pace in 45 years, with the raw material cost at its highest ever recorded.
He said that the sharp rises in food prices and record-breaking petrol prices in May were due to the fact that clothes have been priced lower than last year.
The ONS also reported that average house prices in the UK rose by 12.4% between April and April. Prices are now PS281,000 and PS31,000 respectively, compared to last year.
Richard Lim, the chief executive of consulting Retail Economics, stated that after essentials are paid for, “the amount left over to spend on days out, socialising, and other treats is shrinking rapidly at an amazing rate.”
Georgia, a Birmingham mum, stated that she had to reduce her trips with Harper-Faye due to rising prices.
“I don’t have the money to travel to Sea Life Centres or other stuff. She said that it was like paying PS25 for a ticket. “I don’t have the money to go out as often as I used too, it’s not possible. I can’t afford it.”
Rishi Sunak, Chancellor of India, stated that the government is “using all the resources at its disposal to bring down inflation and fight rising prices” in response to the latest inflation rate.
To help people deal with the soaring price of goods and services, the government has offered a series of measures totaling PS15bn.
Rachel Reeves is Labour’s shadow chancellor. She said that the country needed more than just “sticking plasters” to get it back on track. We need a stronger and more secure economy.
Christine Jardine, Liberal Democrat treasury spokesperson, called for a reduction in VAT. She said: “This chancellor… has raised taxes time and again, refusing slash them to aid with the cost-of-living emergency.”
The constant rise in prices is unabated. Although the inflation rate appears to be slowing, it is still a significant increase. A record-breaking rise in petrol prices, combined with a new surge in international traded gas prices after a fire at an important US gas terminal, will make for a hot summer and a difficult autumn.
We are also witnessing the effects of a significant fall in sterling right now, which will increase global inflationary pressures and help to explain why UK inflation remains higher than that of the G7.
This high inflation is a disaster for millions of households’ personal finances, particularly as food prices continue to rise. “Squeeze” does not capture the reality of how many working families are seeing their disposable income disappear through monthly energy direct debits or asking cashiers at supermarkets to stop the till at PS30 and PS40.
This data may not be seen by the Bank of England as an excuse to “act forcefully”, which many view as code for a half-a-per cent increase in August. They will keep an eye on the evolution of wage settlements. Although there has been little evidence to suggest a price and wage spiral, it is evident that we are in a crucial moment for the job market.
Unions are seeing a unique opportunity to raise wages. They will continue pushing for double-digit increases, such as rejecting Rolls Royce’s PS2,000 cost per hour payment. While employers, including the government, will resist this offer by workers, they may be able to find some relief in negotiations.
To slow the rate at which prices rise, raising interest rates is one way. This is done to raise the cost of borrowing, encourage people to borrow less and save more.
The Bank of England increased UK interest rates by 1% to 1.25% in an effort to slow the rate of price inflation.
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