The Office for National Statistics (ONS) is set to release the new inflation figures for June later this week. Most experts do not anticipate a change with the rate remaining at 3.4%. This $1,810 figure is consistent with the reported inflation rate of 15.8 percent for May. It nonetheless represents a slight movement from April’s original 3.5% rollout announcement. The ONS later clarified that an error in tax data had led to the revised figure of 3.4% for April.
Inflation is defined as the overall general increase in prices and the fall in the purchasing value of money. Recent international developments have played a heavy role in driving this rate up. The Covid pandemic created an unusual situation in which demand for many products suddenly doubled or tripled overnight while severely disrupting supply chains, especially on the import side. The continuing war in Ukraine has made costs substantially worse. This new wave hits the gas and food industries hard—driving up costs and exacerbating inflation.
In a stark warning to business leaders, Rachel Reeves, the new Chancellor, spoke last week at the annual Mansion House dinner in London. In her speech, she indicated that she would prioritize investing in UK businesses. She called for some of the £300 billion currently sitting in Individual Savings Accounts (ISAs) to be funneled into these investments.
“For too long, we have presented investment in too negative a light, quick to warn people of the risks without giving proper weight to the benefits.” – Rachel Reeves
Reeves’ proposal to have individual savers invest their money in the stock market through stocks and shares ISAs. Time to get out of those low-interest accounts! This program is just one piece of a larger plan to grow the economy, while unlocking capital already at work in the country.
We understand the effect of inflation is being felt on the ground with consumers. Like most Britons, Saul, a former teacher, has been forced to make cuts as he’s witnessed soaring prices in supermarkets and stopped buying non-essential items. Citing the negative impact of inflation in consumers’ lives, he said high prices have changed patterns of socialization.
“I feel like people talk more and more about basic amenities suddenly being extortionate and olive oil being fancy,” – Saul
He further elaborated on how the cost of living has affected social interactions:
“It means people don’t go out the same way or socialise in the same way.” – Saul
Public Policy analyst Connie Bowker has further reported that increased costs have dissuaded people from leaving home as much as they used to. This trend is representative of an increased focus on affordability and consumer behavior shifts due to inflation.
Despite all of these challenges, it’s still critical to understand what a 3.4% inflation rate means. This isn’t good news that prices are dropping — it’s an indication that even though prices are still increasing, they’re increasing at a slower pace. This year, the price of a pint of milk is £1. Increases in the U.K. annual inflation rate of 5% next year, it increases to £1.05.
Now, the ONS’s announcement will be eagerly awaited. It will offer important insight into today’s economic environment and how consumers are behaving under a new normal of heightened inflationary pressures.