Inflation has hit a fresh 40-year high, reaching an annual rate of 9.4% in June, up from May’s reading of 9.1%, the Office for National Statistics (ONS) has announced.
The ONS said that the latest UK inflation figure was powered by a 42% year-on-year increase in petrol prices, and an increase of almost 10% in food prices. A litre of petrol rose by 18.1p in June, while costs for milk, cheese and eggs also climbed.
Yael Selfin, chief economist at KPMG UK, told Sky News that “this means more pain is on the way for household budgets”. The UK is expected to suffer the “worst peak in inflation in the rich world” in the autumn, with prices predicted to jump by over 11% in October as households receive their winter energy bills, said The Times.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
However, as households struggle in the face of rising costs, the ONS has noted that prices for a handful of items have fallen, while the rate of inflation has slowed for others.
For instance, the annual rate for clothing and footwear was 6.1% in the year to June 2022, down from 6.9% in May. Clothing and footwear prices normally fall at this time of year as the summer sales season begins, explained the ONS.
However, this time, the fact that the rate of inflation for these products has slowed does not mean the actual price has fallen. One area where prices have actually dropped is for second-hand cars, where prices fell by 2.5% on the month in 2022 – the fifth consecutive monthly fall in prices. Prices for audio-visual equipment, particularly recording media, have done the same.
The Sun today named Currys as one retailer that was “helping out cash-strapped shoppers with an ‘Inflation Busters’ promotion that rolls back the prices on 40 in-demand products to 2021 prices”.
Meanwhile, said The Telegraph, savings rates have reached their highest level in two years – although if predictions on inflation prove accurate, the average saver will lose £789 in real terms this year, according to Finder, the price comparison website.
Waiting for prices to come down might lead to disappointment, said Marketplace. “For most things – like meals at restaurants, clothes, or a new washer and dryer – prices are not going to come back down,” it said.
Laura Veldkamp, a professor of finance at Columbia Business School, explained that although “when somebody sees that [for] their business the costs are too high… they’re pretty quick to recognise that and increase prices… rarely does a person say, ‘Gosh, I’m making too much money, I better reduce those prices to solve that problem.’”
The Bank of England told the BBC in May that “current high rates of inflation are not likely to last" and that inflation will peak this winter, then return to close to 2% in about two years.
Continue reading for free
We hope you're enjoying The Week's refreshingly open-minded journalism.
Subscribed to The Week? Register your account with the same email as your subscription.