Inflation exceeds 10% for first time since 1980s

The latest ONS Consumer Price Index (CPI) has seen inflation hit 10.1% in July, the first time the measure has hit double figures since 1982 according to historic estimates.

The rise in the CPI, which indicates year-on-year increases in price, reflected price rises across all parts of the ‘basket’ of goods and services analysed by the ONS. The largest movement came from food and drink, which saw a 2.3% price increase between June and July 2022, and has risen 12.7% between July 2021 and July 2022.; motor fuels also continue to see steep price rises, up 43.7% on last summer.

The latest increase falls in line with previous Bank of England predictions that inflation would hit double figures before the end of the year which have prompted the Bank to consistently raise interest rates over the last nine months. The reveal also follows news that averages wages fell 3.3% in the UK, prompting calls for more substantial action to be taken by the government to protect consumers from the rising cost of living.

Alpesh Paleja, CBI Lead Economist, commented:

“Inflation figures continue to paint a worrying picture for consumers and businesses alike, and price pressures are set to build further. With a hefty climb in Ofgem’s energy price cap expected in October, CPI inflation will comfortably rise into double-digits over the months ahead.

“The cost-of-living crisis is now very real for both households and businesses, so there needs to be a concrete way forward to support vulnerable groups with higher energy bills.

“But we also need to think about the longer term: incentivising investment in the energy transition is key to reducing our exposure to global price shocks, and bolstering the UK’s energy security. Taking overdue actions to shore up potential growth – for example, adding immediate flexibility to the Apprenticeship Levy for one year – will also build resilience to price pressures over the long term.”

Also released with CPI figures was the Product Price Index (PPI), measuring price changes for manufacturers, both for the cost of raw materials (Input PPI) and sale prices (Output PPI). Both indices have risen sharply since May 2020, in part due to ongoing global supply chain problems which began during the Covid-19 pandemic, with the war in Ukraine and weakening of the pound also having an impact. The Output PPI now stands at 17.1%, its highest level since 1977. The Input PPI now stands at 22.6% in the year to July 2022, a 1.5 percentage point decrease on June’s figure, which may be indicative of a turning point to come in inflation in the rest of the economy, as its rate of growth has slowed in recent months.

House prices have also continued to rise 7.8% in the 12 months to June 2022, meaning the average property is now worth over £282,000. In the North-west, prices are up 6.2% on last June, with an average property value of £212,347 and recorded the greatest month-on-month rise of 2.1% from May to June 2022.