Inflation in the United Kingdom held steady at 3.8% for the year ending in August, the latest reports show. Food price inflation has only gone up since then, increasing for the fifth month in a row. Food prices soared to 5.1%, the highest rate of food inflation seen in the last year-and-a-half. Together, this creates a tough reality for families just trying to make ends meet as they face the inflationary pressures of so many necessities.
Kris Hamer, director of insight at the British Retail Consortium (BRC), echoed those sentiments in his worry over rising food prices. He pointed out that this increase is most disturbing. He pointed out that as food inflation now surpasses wage growth, many families will find it increasingly difficult to manage their budgets.
“With food inflation now outpacing wages, many families will be struggling with the rising cost of living.” – Kris Hamer
Yael Selfin, chief economist at KPMG UK, emphasized that the UK has become “an outlier in recent months on inflation compared to other major economies.” By way of contrast, France was recording an effective deflation rate of 0.8% in August, with Germany also seeing a spike in price growth to 2.1%. The huge gap between these two figures underlines how different the inflationary trends are across Europe.
The recent spike in inflation has been primarily driven by domestic policy decisions. There have been a multitude of other decisions since April that have contributed to increasing inflation. One obvious culprit is the recent hike in employers’ National Insurance Contributions.
“Since April, the rise in inflation has been driven largely by domestic policy choices, including the increase in employers’ National Insurance Contributions.” – Yael Selfin
In her opening statement, Chancellor Rachel Reeves recognised the difficult position many families find themselves in due to escalating living costs. She stated, “I know families are finding it tough and that for many the economy feels stuck.” Her commitment to addressing these challenges was clear when she said, “That’s why I’m determined to bring costs down and support people who are facing higher bills.”
Food prices, overall, are up, but significant staples like cereals and pasta, for example, all had declining prices this month. Cheese, fish and vegetable wholesale prices have all jumped. This higher demand has offset recent decreases and driven the overall sharp increase in food inflation.
The inflation expectations rate continues to be steady, currently at 3.8%. It produces an extremely difficult economic environment, in which high food prices increasingly strain consumers and policymakers alike. Our families are facing major economic and inflationary headwinds. At the same time, the government is under pressure to make impactful moves that offset the impact of skyrocketing costs.