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You can find the current article at its original source at https://www.theguardian.com/business/live/2017/nov/14/uk-inflation-cost-of-living-german-economy-growth-powers-ahead-business-live
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| Poor households hit hard as UK inflation sticks at five-year high - business live | Poor households hit hard as UK inflation sticks at five-year high - business live |
| (about 1 hour later) | |
| The jump in food price inflation to 4.1% may drive more families to Britain’s growing roster of food banks. | |
| Garry Lemon of the Trussell Trust, a charity which runs food bank, says it’s already an issue: | |
| Worrying to see food price #inflation so high. @UniofOxford research by @rloopstra showed that 1/4 households coming to @TrussellTrust network of #foodbanks reported rising food costs as an issue last winter.https://t.co/NDNjO6aoW3 https://t.co/8yEjHZvELv | |
| Several City economists are predicting that inflation may now have peaked, having stuck at 3% last month. | |
| The theory is that the impact of the pound’s Brexit-induced tumble will fade out of the annual inflation figures before much longer. And with the economy weak, it will be hard for retailers to hike prices. | |
| CPI inflation remained unchanged at 3% in October, against consensus expectations of a small rise. We expect inflation to ease in the coming months, as the feed-through from sterling's past decline fades pic.twitter.com/XqSL5k4KZS | |
| However, food prices may still keep rising over the next few months. | |
| Stephen Oldfield, Agri-Food leader at PwC, fears that prices may accelerate before Christmas, making the festive season a little less jolly. | |
| Oldfield says: | |
| “This food cost inflation has yet to fully come through to prices on the shelves – the recent inflation figures for the UK were 3%, with food a main contributor. | |
| But that still doesn’t fully reflect the costs rises, so we expect food prices to continue to rise during the final quarter of 2017. One of the reasons for this is the time lag, as costs rise in terms of feeding through the food chain from importers to suppliers to supermarkets themselves. | |
| And Stuart Law, CEO of peer-to-peer lender Assetz Capital, reckons savers still face meagre returns. | |
| “It is likely that inflation has peaked at 3%, but will fall very slowly over the next year or two. This will provide little comfort to those losing money every day on their savings where the bank’s rate of interest is less than inflation. | |
| “The recent base rate rise will have also driven up borrowing costs, whilst not passing much on to savers so, with inflation perhaps falling slowly now from 3%, this rise may have been implemented prematurely.” | |
| With wages rising at little more than 2%, and inflation at 3%, Christmas will be a squeeze for many families. | With wages rising at little more than 2%, and inflation at 3%, Christmas will be a squeeze for many families. |
| Hannah Maundrell, editor in chief of money.co.uk, has some advice for coping with the cost of living: | Hannah Maundrell, editor in chief of money.co.uk, has some advice for coping with the cost of living: |
| check you’re on a fixed rate energy tariff (one that guarantees the price you pay per unit) and if not switch | check you’re on a fixed rate energy tariff (one that guarantees the price you pay per unit) and if not switch |
| shop around for food and fuel so you’re not paying any more than you need to | shop around for food and fuel so you’re not paying any more than you need to |
| check whether you could cut your mortgage repayments by switching to a fixed rate deal if you’re on your lender’s SVR | check whether you could cut your mortgage repayments by switching to a fixed rate deal if you’re on your lender’s SVR |
| Here’s more details from Resolution’s Stephen Clarke on how inflation is hurting poorer households: | Here’s more details from Resolution’s Stephen Clarke on how inflation is hurting poorer households: |
| “While the headline rates of inflation remained unchanged, the drivers of inflation have continued to shift – and are hitting less well-off families particularly hard. | “While the headline rates of inflation remained unchanged, the drivers of inflation have continued to shift – and are hitting less well-off families particularly hard. |
| “Food and drink prices increased faster than at any point in the last four years, while clothing prices also rose at a rate above overall inflation. The rising cost of these basic items affects low and middle income households far more than better-off households, who are also being cushioned by static fuel costs. | “Food and drink prices increased faster than at any point in the last four years, while clothing prices also rose at a rate above overall inflation. The rising cost of these basic items affects low and middle income households far more than better-off households, who are also being cushioned by static fuel costs. |
| “With prices rising far quicker than wages, it is vital that the Chancellor keeps in mind the double whammy of squeezed pay packets and frozen benefits when he announces his Budget next week.” | “With prices rising far quicker than wages, it is vital that the Chancellor keeps in mind the double whammy of squeezed pay packets and frozen benefits when he announces his Budget next week.” |
| Stephen Clarke of the Resolution Foundation has interrogated today’s data, and shown that poorer households are suffering particularly badly from the surge in inflation. | Stephen Clarke of the Resolution Foundation has interrogated today’s data, and shown that poorer households are suffering particularly badly from the surge in inflation. |
| That’s because essential items, such as food, are rising sharply in price. Higher energy bills also hit families across the board. | That’s because essential items, such as food, are rising sharply in price. Higher energy bills also hit families across the board. |
| In contrast, the cost of ‘non-essentials’ such as hotels and restaurants was more subdued last month. | In contrast, the cost of ‘non-essentials’ such as hotels and restaurants was more subdued last month. |
| Plus, the recent drop in petrol prices is welcome if you own a car, but not if you can’t afford one... | Plus, the recent drop in petrol prices is welcome if you own a car, but not if you can’t afford one... |
| The rising price of essentials hits lower income households harder. The result is that inflation over past 6 months higher for lower-income households, richer households felt the squeeze last winter (2/2) pic.twitter.com/ANjqmuGdul | The rising price of essentials hits lower income households harder. The result is that inflation over past 6 months higher for lower-income households, richer households felt the squeeze last winter (2/2) pic.twitter.com/ANjqmuGdul |
| A Treasury spokesperson says the government is trying to fight the cost of living squeeze: | A Treasury spokesperson says the government is trying to fight the cost of living squeeze: |
| “We understand that people are concerned about increases in everyday costs. That’s why we have cut taxes and introduced the National Living Wage, which has lifted the wages of the lowest paid by over 6% above inflation. | “We understand that people are concerned about increases in everyday costs. That’s why we have cut taxes and introduced the National Living Wage, which has lifted the wages of the lowest paid by over 6% above inflation. |
| It’s also why we are bringing in an energy cap to help people with the cost of household bills.” | It’s also why we are bringing in an energy cap to help people with the cost of household bills.” |
| The jump in food and drink prices are a particularly blow for the poorest in society (as everyone has to eat). | The jump in food and drink prices are a particularly blow for the poorest in society (as everyone has to eat). |
| So even if inflation peaks soon, the cost of living squeeze could continue for a while. | So even if inflation peaks soon, the cost of living squeeze could continue for a while. |
| Yael Selfin, chief economist at KPMG, explains: | Yael Selfin, chief economist at KPMG, explains: |
| “With monthly inflation gradually moderating, households will be relieved that the UK may have now reached the peak in year-on-year price rises. | “With monthly inflation gradually moderating, households will be relieved that the UK may have now reached the peak in year-on-year price rises. |
| However, the overall figures mask significant increases in the price of basic necessities such as fruit and vegetables, which are most likely to hit those already struggling to cope with the squeeze on real incomes due to the high inflation. | However, the overall figures mask significant increases in the price of basic necessities such as fruit and vegetables, which are most likely to hit those already struggling to cope with the squeeze on real incomes due to the high inflation. |
| Labour MP Chuka Umunna says the “ongoing Brexit chaos” is hitting people in their pockets. | Labour MP Chuka Umunna says the “ongoing Brexit chaos” is hitting people in their pockets. |
| “Not only is inflation continuing to run well above the Bank of England’s target, at 3%, but the inflation rate for food and drink has increased to 4.1%, the highest since September 2013. | “Not only is inflation continuing to run well above the Bank of England’s target, at 3%, but the inflation rate for food and drink has increased to 4.1%, the highest since September 2013. |
| “People are feeling the Brexit squeeze as real wages contract and everyday items become more and more expensive. Nobody voted in the referendum to make themselves poorer, so people have every right to look at the impact Brexit is having on their finances and ask themselves whether the realities of Brexit match up with what they were promised. If not, everyone has the right to change their mind. | “People are feeling the Brexit squeeze as real wages contract and everyday items become more and more expensive. Nobody voted in the referendum to make themselves poorer, so people have every right to look at the impact Brexit is having on their finances and ask themselves whether the realities of Brexit match up with what they were promised. If not, everyone has the right to change their mind. |
| On one level, today’s inflation reading is a relief to the Bank of England. | On one level, today’s inflation reading is a relief to the Bank of England. |
| The BoE is responsible for maintaining price stability. So governor Mark Carney won’t have to write a letter explaining why CPI has deviated more than 1 percentage point away from the 2% target. | The BoE is responsible for maintaining price stability. So governor Mark Carney won’t have to write a letter explaining why CPI has deviated more than 1 percentage point away from the 2% target. |
| But.... the Bank expected inflation to push over 3% this autumn, when it raised interest rates from 0.25% to 0.5% two weeks ago. | But.... the Bank expected inflation to push over 3% this autumn, when it raised interest rates from 0.25% to 0.5% two weeks ago. |
| If inflation isn’t as strong as feared, has the Bank blundered by hiking borrowing costs, at a time when consumers are cautious and economic growth is slow? | If inflation isn’t as strong as feared, has the Bank blundered by hiking borrowing costs, at a time when consumers are cautious and economic growth is slow? |
| So UK inflation still at 5 year high but has it reached its peak?begs question were interest rates raised too soon given economic weakness? | So UK inflation still at 5 year high but has it reached its peak?begs question were interest rates raised too soon given economic weakness? |
| Inflation is measured across a number of areas. And this chart neatly shows how transport (yellow) and food (blue) have driven inflation higher this year. | Inflation is measured across a number of areas. And this chart neatly shows how transport (yellow) and food (blue) have driven inflation higher this year. |
| Food and transport (fuels) important drivers of change in #inflation rate over last 2 years pic.twitter.com/AUfJstQN8o | Food and transport (fuels) important drivers of change in #inflation rate over last 2 years pic.twitter.com/AUfJstQN8o |
| In 2016, they both pulled the cost of living down (as you can see, they’ve below zero), but this year they have both become significant contributors. | In 2016, they both pulled the cost of living down (as you can see, they’ve below zero), but this year they have both become significant contributors. |
| Alistair Wilson, Head of Retail Platform Strategy at Zurich, sees some light at the end of the living squeeze tunnel: | Alistair Wilson, Head of Retail Platform Strategy at Zurich, sees some light at the end of the living squeeze tunnel: |
| “Higher inflation is creating a living standards headache for families as prices continue to rise faster than their pay packets. | “Higher inflation is creating a living standards headache for families as prices continue to rise faster than their pay packets. |
| However, there are signs that the worst of the squeeze on family finances may be coming to an end with British workers set for the biggest pay rises since before the financial crisis, likely to increase by between 2.5% and 3.5% next year. | However, there are signs that the worst of the squeeze on family finances may be coming to an end with British workers set for the biggest pay rises since before the financial crisis, likely to increase by between 2.5% and 3.5% next year. |