UK inflation hits 40-year high of 9%

UK inflation surged in April to its highest annual rate since 1982, increasing the pressure on finance minister Rishi Sunak to help households facing a rapidly worsening cost-of-living crisis.

Consumer price inflation hit 9% in April, the Office for National Statistics said on Wednesday.

Soaring energy bills were the biggest driver of inflation driver, reflecting last month’s increase in regulated UK energy tariffs.

The UK now has the highest inflation rate of Europe’s five biggest economies.

“We cannot protect people completely from these global challenges but are providing significant support where we can, and stand ready to take further action,” said Sunak.

Food prices rose by nearly 7% in the 12 months to April, the ONS said.

On Monday, UK central bank governor Andrew Bailey said food price rises were a major worry as he apologised for “being apocalyptic for a moment.”

REACTION:

CBI Chief Economist Rain Newton-Smith: “It is critical the government explores options to help people facing real hardship now, and support cashflow for vulnerable firms.

“Stimulating business investment is also crucial, to both plug the near-term gap in growth and to shore up the economy’s potential to withstand future shocks.

“Turning good intentions on a permanent investment deduction into a firm commitment, setting out an infrastructure roadmap and publishing a digital strategy are steps which can be taken without delay.”

Myron Jobson, senior personal finance analyst, Interactive Investor: “Inflation has surged by an eyewatering 9% in the year through April – it’s highest levels in more than 40 years.

“The latest jump in inflation also marks seven straight months of prices rising at a pace not seen since in a generation and nine months of inflation rising faster than the Bank of England’s 2% target.

“Household budgets are crumbling under the crumbling under the pressure of spiralling inflation, driving many to breaking point.

“There is nowhere to hide for consumers as inflation has been most acute on unavoidable household costs like food, energy, housing and transportation.

“Runaway inflation means that many households are being forced to make tough decisions on their spending on a daily basis.

“Charities have reported that an increasing number of people are taking drastic steps, like forgoing meals, just to stay financially afloat.

“With the cost-of-living storm set to rage on for months to come, the situation appears desperately bleak for many households – and Russia’s devastating invasion of Ukraine could yet deepen the cost-of-living crisis.

“It is worth remembering that inflation doesn’t impact all consumers equally as we don’t all spend money on the same things.

“We all have a personal inflation number that is unique to us and could be far higher than the catch-all headline figure.

“Escalating inflation means that we are all spending more on the same things.

“Keep tabs on your spending to get a better ideas of how exposed your back pocket is to inflation is crucial.”

Richard Carter, head of fixed interest research at Quilter Cheviot: “Just days after Andrew Bailey and the Bank of England warned of ‘apocalyptic’ food prices, inflation has surged to an eyewatering 9% in April, delivering another hammer blow to households already fretting about the cost of living.

“The rise comes as a result of a sharp rise in household utility bills during the month and there are continued warnings that the worst is to come.

“Unlike in the US, UK inflation continues to rise for the time being, stoking further fears around the cost of living.

“It will also add to the pressure on the Bank of England to increase interest rates and get to grips with soaring prices even if, as they admit themselves, many of the factors driving inflation are beyond their control.

“Indeed, we should not be surprised to see further pressure mount on the government soon to pull some fiscal levers and look to alleviate the pain on households come the Autumn.

“If there is one crumb of comfort today, it’s that many forecasters expect this to be close to the peak in the rate of CPI.

“So while high inflation will remain present for some time, we should hopefully see the beginning of the end of this painful inflation journey soon.”

British Chambers of Commerce Head of Economics Suren Thiru: “The jump in UK inflation in April is eye-watering and underscores the growing cost-of-living crisis facing households and the damaging squeeze on firms’ ability to invest and operate at full capacity.

“The marked acceleration in the headline rate in April reflected the continued upward pressure on prices from surging energy and commodity costs, as well as the energy price cap rise and the reversal of the VAT reduction for hospitality in the month.

“The scale at which inflation is damaging key drivers of UK output, including consumer spending and business investment, is unprecedented and means there is a real chance the UK will be in recession by the third quarter of the year.

“While inflation may moderate a little over the summer, April’s inflationary surge is likely be surpassed in October as the expected energy price cap rise in the month lifts inflation above 10%.

“Soaring inflation means that a June interest rate rise is inevitable.

“However, higher interest rates will do little to address the global factors driving this inflationary surge and risks undermining confidence and aggravating the financial squeeze on consumers and businesses.

“Although surging global energy and commodity prices aren’t typically something in the UK government’s direct control, more needs to be done to help consumers and businesses through this difficult period.

“This should include reversing the rise in National Insurance Contributions and cutting VAT on business energy bills to 5%.”

Rebecca McDonald, senior economist at the Joseph Rowntree Foundation, which campaigns on behalf of lower-income households: “As the price of essentials like food and energy continue to soar, the Chancellor’s inaction will make an already desperate situation for many even worse.”

Danni Hewson, AJ Bell financial analyst: “It’s a massive jump from seven to nine percent in just a month but anyone in charge of household budgets won’t be surprised.

“Nor will they be surprised that the colossal hike in the energy price cap, which horrifyingly protects consumers from the worst effects of energy inflation, makes for the biggest contribution to the jump.

“Finding the extra £700 a year just to heat and power homes would have been a shock all by itself but when it comes alongside record high prices at the pump and food inflation, adding tens of pounds to the weekly shop, there’s little wonder poverty campaigners are pushing hard for the government to take further action.

“Dubbed ‘Awful April’ the month brought about a slew of rises as mobile phone operators put up their tariffs and the government’s VAT reduction on hospitality also ran its course.

“Popping in for a coffee suddenly became just that little bit more expensive, a thousand cuts slicing away at wage packets that simply aren’t keeping up with the pace of change.

“April blasted through budgets like a perfect storm as a resurgence of global demand clashed with a sudden supply shock brought about by the war in Ukraine.  In the UK the added burden of that price cap change has propelled it to the top of the G7 inflation leader board, a plaudit no country wants to burnish.

“Few sectors have been left untouched because of the nature of where prices have shot up and looking forward, with prices leaving the factory gate and prices for raw materials also surging by record numbers last month, there looks to be little respite on the cards.

“Whilst the intensity of last month’s shock won’t be repeated, at least until the next price cap change in October, the one thing consumers really need – price drops – aren’t likely for many months to come.

“Pressure has been building for businesses to protect consumers from the worst of the hikes and in some cases that has been possible, but not all businesses have the kind of cushion which will allow them to nibble away at margins.

“Smaller businesses in particular are fighting their own battles with inflation and looking ahead the prospect that trade will suffer, that the much-needed dream of a post-covid boom has disintegrated, replaced by fears that recession has already grabbed hold.”