Highest inflation rate in 40 years for fuel and food fires

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Sharp rises in food and fuel prices pushed inflation to its highest level in 40 years on Wednesday, sparking fresh calls for ministers to do more to help ease the cost of living crisis.

Official figures from the Office for National Statistics showed inflation hit a rate of 9.1% in the 12 months to May, up from 9% in April and its highest level since 1982. But with the Bank of England warning that inflation could hit 11 per cent later this year, the government is under increasing pressure to offer more support now to millions of struggling households.

Asda chairman Stuart Rose has urged ministers to rethink and floated the idea of ​​a VAT cut to drive down spiraling prices driven by the post-Covid supply crisis and the invasion Russian from Ukraine. “I know the government is very reluctant to put their hands in their pocket again, as they have run up a huge debt as a result of Covid,” Lord Rose told the TUSEN.

“But this is a crisis of similar proportions, and people could be affected much longer than Covid has affected us.

“So now is the time to rethink. I would urge them to do more and I would urge them to do more for people at the bottom of the income scale.

The ONS said the latest rise in inflation was largely due to food prices, which rose 8.7% in the year to May. The largest contributions came from bread, cereals and meat.

But he added that the jump in the cost of fuel was also driving the inflationary push with petrol prices averaging 165.9p a liter in May 2022, down from 127.2p a liter a year earlier. early.

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With the price of diesel and petrol reaching record highs in May, the ONS said the 12-month rate for fuels was 32.8%, the highest since January 1989.

The war in Ukraine is likely to add to price pressures in the coming months, and in a further blow today the RAC said petrol and diesel prices had both reached new highs yesterday.

ONS Chief Economist Grant Fitzner noted “the continued sharp rise in food prices and record petrol prices”, but also pointed to “the price of goods leaving factories” which, according to him, “has grown at its fastest rate in 45 years”.

Rising commodity and factory prices have sparked renewed fears that inflation could stay higher for longer, leading to more calls for higher wages from factory workers. public and private sectors.

Former Treasury minister Lord O’Neill said the UK economy was in a “very fragile position”, adding on TUSEN Radio 4’s Today program that more persistent inflation could lead to a ” vicious cycle of the 1970s”, forcing the Bank of England to take even more action. action to control rising prices.

Last week, it raised interest rates by 0.25 percentage points to 1.25%.

Chancellor Rishi Sunak is resisting calls from some Cabinet colleagues and Tory MPs to cut income taxes to ease the crisis.

The inflation rate rose again in May, remaining at its highest level in 40 years, the Office for National Statistics said.

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The consumer price index (CPI) inflation rate rose from 9% in April to 9.1% in May, statisticians said.

The increase is in line with what analysts had expected.

“Although still at historically high levels, the annual inflation rate was little changed in May,” said ONS chief economist Grant Fitzner.

“The continued strong rise in food prices and record gasoline prices were offset by lower clothing price increases than last year and a decline in the often fluctuating prices of computer games.

“The price of goods leaving factories rose at its fastest pace in 45 years, driven by the general rise in food prices, while the cost of raw materials jumped at its fastest pace on record.”

Images from the press association

The change was largely due to rising food prices, which added more than 0.2 percentage point to the inflation figure, the ONS said.

Clothing and footwear prices helped contain inflation, while leisure and culture prices also pulled it down.

The news will add to the difficulties faced by many people across the UK. Energy bills rose 54% for the average household in early April and will remain at that level through October.

But forecasts released this week predict that the government’s cap on energy bills could rise again from an already record high of £1,971 to £2,980 in the autumn.

The Bank of England predicted that inflation would hit over 11% in October after the price cap was changed again.

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Shadow Chancellor Rachel Reeves said: ‘Today’s rise in inflation is another milestone for people who see wages, growth and living standards continue to fall.

“Although rapid inflation is pushing family finances to the brink, the downward spiral many people face in Britain is nothing new.

“Over the past decade, Conservative mismanagement of our economy has meant that living standards and real wages have not risen.”

Chancellor Rishi Sunak said: ‘I know people are worried about the rising cost of living which is why we have taken targeted action to help families, securing £1,200 to all eight million households the most vulnerable.

“We are using all the tools at our disposal to bring down inflation and fight rising prices – we can build a stronger economy through independent monetary policy, responsible fiscal policy that does not increase inflationary pressures and driving our long-term productivity and growth.

The price of energy does not only affect household energy bills.

Gas, oil and other fossil fuels are needed to make and transport many of the goods that households buy every month.

When the price of fuel increases, the price of the final product also increases.

Energy prices have skyrocketed over the past year. For starters, they started to rise when the global economy started to reopen and demand for energy increased after the pandemic.

Prices then worsened, particularly in Europe, when Russia launched a full-scale invasion of Ukraine in February.

Russia is one of the largest energy producers in the world.

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