Inflation hits new 40-year high at 9.4% amid cost-of-living squeeze
Social Affairs Correspondent Sarah Corker reports on how eye-watering inflation is affecting locals in Burnley
UK inflation has soared to a fresh 40-year high tightening the cost-of-living squeeze on households across the country.
The rate of Consumer Prices Index inflation rose to an annual rate of 9.4% in June - up from 9.1% in May, the Office for National Statistics (ONS) has said.
It means inflation in Britain remains at the highest level since February 1982 and heaps yet further strain on cash-strapped households and businesses.
Increasing energy, food and fuel prices - the latter of which hit record levels in June - have rocketed amid the painful squeeze on living standards.
The Bank of England expects inflation to accelerate even more in the coming months, calculating it will hit double digits in the autumn - above 10% - a record high that is expected to push the economy into a recession.
Chief economist at the ONS, Grant Fitzner, said: “ The increase was driven by rising fuel and food prices, these were only slightly offset by falling second-hand car prices. “The cost of both raw materials and goods leaving factories continued to rise, driven by higher metal and food prices respectively. “These increases saw raw materials post their highest annual increase on record, with manufactured goods at a 45-year high.”
Newly-appointed Chancellor Nadhim Zahawi and Bank of England governor Andrew Bailey have both pledged to get inflation under control.
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Mr Zahawi said: “Countries around the world are battling higher prices and I know how difficult that is for people right here in the UK, so we are working alongside the Bank of England to bear down on inflation.”
The economy has suffered a series of shocks following a succession of Covid-19 lockdowns and Russia’s invasion of Ukraine, which has further inflamed the international market price of gas, oil and other commodities.
Mr Bailey told ITV News in May how the rising cost of living is hitting the poorest harder, and that the Bank is virtually powerless to prevent this further strain. As a result, spending will fall.
However, Torsten Bell, the chief executive of living standards think tank the Resolution Foundation, said the latest inflation figures are “bad news for everyone”.
He said food prices were rising faster than the 9.4% inflation rate – at 9.8% – which was a “disaster for poorer households”, while soaring petrol prices were hitting wealthier families – fuel costs have increased 42.3% in the last year.
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.
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.
Liberal Democrat Treasury spokeswoman Sarah Olney said the Tory leadership contest had left a “zombie government” which was failing to respond to the cost-of-living crisis.
“Families and pensioners are being hammered by relentless price hikes yet the government is nowhere to be found,” she said. “Britain now has a zombie government in the middle of a cost of living crisis."
Ms Olney said the UK "can’t wait any longer for this Conservative party to play out their horror show leadership contest" and that “VAT must be slashed right away to cut prices at the shopping tills and fuel pumps.”
Anna Leach, deputy chief economist at the Confederation of British Industry warned inflation was likely to remain high for the rest of the year “severely eating into strained household incomes”.