Annual consumer price inflation hit 10.1% in July, according to data released by the Office for National Statistics on Wednesday, from 9.4% in June. Soaring food prices – up 12.7% since July 2021 – were the main contributor to the acceleration in inflation, the ONS said.
The headline inflation figure was higher than expected by a Reuters poll of economists, and food inflation is now at its highest level in 14 years.
“All eleven classes of food and non-alcoholic beverages contributed to the rise in the change in the annual rate of inflation, where prices have risen overall this year but fell a year ago,” the ONS said. .
The largest upside contributions came from bread and cereals, as well as milk, cheese and eggs, with notable price increases for cheddar cheese and yogurt.
On a monthly basis, the consumer price index rose 0.6% in July, after remaining unchanged a year ago. Rising petrol and diesel prices, as well as rising air fares, are also to blame, the ONS added.
The higher-than-expected reading will keep pressure on the Bank of England to follow last month’s biggest interest rate hike in 27 years with further rate hikes despite growing evidence of pressure on household budgets and signs that the The UK economy may have already entered a recession.
Data released last week showed the country’s GDP fell 0.1% in the second quarter of this year.
And Tuesday’s official labor market report found paychecks rose 4.7% between April and June, meaning average earnings fell 3% in the period once l inflation taken into account – the biggest fall in real wages since the ONS began keeping records more than 20 years ago.
“The situation is miserable for UK consumers, who are currently under pressure from all sides,” wrote Kallum Pickering, senior economist at Berenberg, in a note to clients. “Wages are not rising fast enough to offset soaring inflation, but they are rising too fast for the [Bank of England’s] like it because it wants to bring inflation back to its target,” he added.
Inflation is expected to rise further later this year, driven by further rises in regulated energy bills in October. Electricity prices have already increased by 54% and gas prices by 95.7% in the 12 months to July 2022 due to soaring wholesale prices, compounded by the invasion of Ukraine by Russia at the end of February.
UK government officials are reportedly looking at options to provide more support to households. But Liz Truss, favorite to succeed Boris Johnson as Britain’s next prime minister in early September, has yet to set out a detailed plan beyond promising tax cuts.
The opposition Labor Party is calling for the extension of a windfall tax on UK oil and gas companies to help fund a freeze on household heating bills this winter.
— Anna Cooban and Rob North contributed to this article.