Inflation accelerates to 30-year high of 7% as cost of living crisis deepens
Many are now asking how many more price hikes they can stomach, as Sarah Corker reports
The rate of inflation shot up to a new 30-year high of 7% in March, tightening the squeeze on households amid soaring food and fuel prices, official figures show.
Consumer Prices Index (CPI) inflation rose to 7% in the year to March, up from 6.2% in February, the Office for National Statistics (ONS) said.
This is the highest since March 1992, when inflation stood at 7.1%.
The rise was higher than the 6.7% that analysts had expected and was driven by fuel, restaurant and food prices, dealing an added blow to households.
But the increase does not take into account the average 54% increase in energy bills that was applied to around 22 million households two weeks ago, so April's figure is expected to be even higher.
The rise in inflation comes a day after the ONS revealed UK workers have suffered the biggest fall in their real pay for nearly nine years, as wages fail to keep up with inflation. In February alone, real regular wages dropped 2.1% - the biggest drop since August 2013.
ONS chief economist Grant Fitzner said annual inflation increased "sharply again", adding: “Amongst the largest increases were petrol costs, with prices mostly collected before the recent cut in fuel duty, and furniture.
“Restaurants and hotel prices also rose steeply in March while, after falling a year ago, there were rises across a number of different types of food".
Petrol was 160.2p per litre on average in March and diesel 170.5p, both are record high prices.
The price of clothes and shoes rose by 9.7% in the year to March, while furniture, household equipment and maintenance jumped 10.4%, and food and non-alcoholic beverages were up 5.9%.
“The price of goods leaving UK factories has continued to rise substantially with metal and transport products both at record highs and food reaching its highest rate for over a decade. Raw material costs also rose, with a notable increase in the price of crude oil," added Mr Fitzner.
What is inflation?
Inflation is measured by the ONS which checks the prices of a range of more than 700 everyday items, called a "basket" of goods and services.
The basket is regularly updated to reflect the population's general buying preferences and includes everyday items such as a loaf of bread and a bus ticket, to larger purchases like a car and a holiday.
In 2022, sports bras, crop tops, tinned pulses and meat-free sausages were added to reflect the public's rising interest in exercise - perhaps an indication of how lockdown impacted lifestyles - and plant-based diets.
The price of that "basket" informs us of the overall price level - this is known as the Consumer Prices Index (CPI).
To calculate the rate of inflation, analysts compare the level of CPI (the cost of the basket) with what it was in the same month a year ago. The change in the price level over the year is the rate of inflation.
Jack Leslie, senior economist at the Resolution Foundation think tank, said: “With ONS data yesterday showing that wages are not keeping pace with rising prices, Britain’s cost-of-living crisis – on track to be the biggest squeeze since the mid-70s – will continue to worsen before it starts to ease at some point next year.”
The price hike in energy bills will not appear in CPI figures until next month, when April’s data is expected to show another jump, further demonstrating the increased pressure on ordinary people.
The Bank of England has predicted that inflation could peak at around 8% in April.
Liberal Democrats leader Ed Davey said: “Pensioners and hard pressed families need urgent help with their energy bill and unfair tax hikes to be immediately reversed.
“It is now or never to save Britain from this cost-of-living crisis, and it is clear this government is not up to the job.”
Alpesh Paleja, lead economist at the Confederation of British Industry, also warned of further inflation rises to come.
“Volatility in global commodity prices and ongoing supply chain disruption will continue to stoke price pressures,” he said.
“The result will be even higher costs for businesses, and a deep squeeze in the cost-of-living for households.”
He called for efforts to make homes and workplaces more energy efficient as a way to keep bills down, something that experts warned was missing from the government’s energy strategy last week.
Chancellor Rishi Sunak said in response to the latest figures: “We’re seeing rising costs caused by global pressures in our supply chains and energy markets which could be exacerbated further by Russian aggression in Ukraine.”
He said that the government would provide £22 billion of support this financial year and is helping people into work.