UK inflation hits 7% as cost of living crisis deepens – business live | Business

03:38

Economist Simon French of Panmure Gordon warns inflation could peak at ten% This year:

03:29

Prices in restaurants and hotels jumped 2% between February and March 2022, the biggest monthly change since ONS data began in 1988.

This was mainly due to the rising cost of alcoholic beverages served in restaurants, cafes and drinking places, as well as accommodation services.

Kitty Uscherchief economist at Institute of Directorsmentioned:

“It appears that when people restarted their social lives when restrictions ended in March, the places they visited were able to pass their own higher costs onto their loyal customers.”

kate nicholsCEO of UKHospitalitywarns that hotel businesses are already experiencing double-digit cost increases.

The end of the temporary reduction in VAT, from 20% to 12.5%, in pubs, cafes, bars and restaurants this month will also drive up prices.

03:02

Here’s a breakdown of the factors pushing UK inflation to a 30-year high of 7%:

  • Food and non-alcoholic beverages: 5.9%
  • Alcoholic beverages and tobacco: 4.8%
  • Clothing and footwear: 9.8%
  • Housing, water, electricity, gas and other fuels: 7.7%
  • Furniture, household equipment and maintenance: 10.3%
  • Health: 2.5%
  • Transportation: 13.4%
  • Communications: 0.7%
  • Leisure and culture: 4.9%
  • Education: 4.5%
  • Restaurants and hotels: 6.9%
  • Miscellaneous goods and services: 1.9%
02:47

UK factories were also hit by soaring raw material costs and continued to raise their own prices.

Input costs paid by growers rose 19.2% in the year to March, the ONS reports, the highest rate since records began in January 1997.

In March alone, the inflation rate for inputs was 5.2%, compared to 1.8% in February, which is also a record increase.

Metal products and crude oil were the main contributors, due to soaring commodity prices since the start of the war in Ukraine.

ONS says:

Crude oil and gas prices continue to rise, in part due to global geopolitical tensions, including the conflict in Ukraine and trade restrictions with Russia.

These increases are reflected in the ex-factory prices of heavy industry, such as fabricated metal products, reflecting the importance of oil and fuel in their input costs.

Producers raised producer prices by 11.9% from a year ago (the highest rate since September 2008), which will translate into higher prices for consumers.

02:34

These charts highlight the price spike:

Inflation in the UK until March 2022 Photography: NSO
Inflation in the UK
Inflation in the UK Photography: NSO
02:30

Energy costs have also skyrocketed over the past year.

Gas prices were 28.3% higher in March than a year ago, while electricity was 19.2% higher.

That, however, does not include the latest price cap increase, which pushed up average bills by 54% for around 22 million households this month.

Kerosene prices for home heating increased by 44.0% between February and March 2022. Fuel oil is not covered by Ofgem’s price cap, so households that rely on kerosene (often in rural areas) have seen cost spiral in recent months.

02:23

The jump in fuel prices to record highs drove up inflation in March, reports the Office for National Statistics.

Average petrol prices were 160.2 pence per liter in March 2022, down from 123.7 pence per liter a year earlier.

Diesel also hit a record high in March at 170.5 pence a litre, after Russia’s invasion of Ukraine pushed up oil prices.

ONS says:

Average petrol prices rose by 12.6 pence per liter between February and March 2022, the biggest monthly rise on record (since 1990). This compares to an increase of 3.5 pence per liter between the same months of 2021.

Similarly, diesel prices have risen by 18.8 pence per liter this year, compared to a rise of 3.5 pence per liter a year ago.

02:12
Inflation in the UK
UK inflation rate Photography: NSO
02:10

ONS Chief Economist, To agree Fitznersays “wide” price hikes pushed inflation to 7% last month.

02:07

Introduction: UK inflation hits 7%

Hello and welcome to our ongoing coverage of business, the global economy and financial markets.

Inflation in the UK has accelerated to a new 30-year high, deepening the cost of living crisis.

Consumer prices jumped 7% in the year to March, down from 6.2% in February, according to just-released figures, as living standards continue to be squeezed.

This is the highest CPI inflation rate since March 1992, and higher than expected, as energy, fuel and food continue to rise sharply.

On a monthly basis, the CPI rose 1.1% in March.

This jump in inflation means that workers are taking a pay cut in real terms. Total pay (including bonuses) increased 5.4% annually in the three months to February, while regular pay increased 4%.

Inflation is expected to rise further in April, possibly more than 8%, due to the 54% increase in the energy cap. This will intensify the pressure on households, with economists predicting it will be worst parliament on record for growth in living standards.

Inflation is also hitting business confidence. Financial services business sentiment has fallen at its fastest pace since September 2019, according to the latest CBI/PwC financial services survey released this morning.

Inflation is also a global issue at the moment – in America it soared to 8.5% last month, a 40-year high, as gasoline and food prices surged.

And overnight, it prompted New Zealand’s central bank to raise interest rates by half a percentage point, its biggest increase in 22 years, after inflation there hit 5, 9%.

Agenda

  • 7am BST: UK consumer inflation report for March
  • 7am BST: UK producer price inflation report for March
  • 9am BST: IEA releases monthly oil report
  • 9.30am BST: UK house price index for February
  • 3:00 p.m. BST: Bank of Canada sets interest rates