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UK inflation rate in surprise rise to 10.4% as salad crisis pushes up prices UK inflation rate in surprise rise to 10.4% as salad crisis pushes up prices
(about 1 hour later)
Increase confounds forecasts of a modest dip and adds to pressure on Bank of England to raise interest ratesIncrease confounds forecasts of a modest dip and adds to pressure on Bank of England to raise interest rates
Live coverage: UK inflation jumps as cost of living crisis intensifiesLive coverage: UK inflation jumps as cost of living crisis intensifies
UK inflation unexpectedly jumped up in February to close to its highest level in 40 years, driven by rises in the cost of drinks, women’s clothes and fresh food as salad items ran short. UK inflation jumped unexpectedly in February after food prices surged at their highest rate for 45 years, piling pressure on the Bank of England to increase interest rates again this week.
The Office for National Statistics (ONS) said annual inflation as measured by the consumer prices index stood at 10.4%, confounding City forecasts for a modest fall to 9.9%. Adding to the squeeze on household incomes, the consumer prices index (CPI) accelerated to 10.4% from 10.1% in January, with prices driven higher by a rise in the cost of drinks, women’s clothes, meals out and fresh food as salad items ran short.
Goods and services have increased dramatically in price since last year when the official inflation rate was nearer 6% and by 17.2% over the past two years. Inflation was close to zero in February 2021.
The ONS said the cost of food and non-alcoholic beverages in particular had risen by around 18% in the year to February, the highest price growth rate since August 1977.
February’s rise in CPI came as a shock to City analysts, who had predicted a fall to 9.9% in response to reducing gas and oil prices and the lower cost of raw materials on global markets. Inflation had fallen for the previous three months, cooling from a peak of 11.1% in October to reach 10.1% in January.
Labour accused the government of making families worse off, while business leaders said they were concerned that Britain was being damaged by persistently high inflation.
The latest figures are likely to add to pressure on the Bank of England to raise interest rates on Thursday, despite growing fears over the unfolding crisis of confidence in the global banking system after the failure of Silicon Valley Bank in the US earlier this month and the weekend rescue of the Swiss lender Credit Suisse.The latest figures are likely to add to pressure on the Bank of England to raise interest rates on Thursday, despite growing fears over the unfolding crisis of confidence in the global banking system after the failure of Silicon Valley Bank in the US earlier this month and the weekend rescue of the Swiss lender Credit Suisse.
Inflation had fallen for three consecutive months prior to February, cooling from a peak of 11.1% in October to reach 10.1% in January before last month’s unexpected reverse. Rob Morgan, the chief investment analyst at the stockbroker Charles Stanley, said Britain’s high inflation rate “kept coming back, like the Terminator” and gave the Bank of England’s policymakers “every reason to hike interest rates” when they meet on Thursday.
The ONS blamed a sharp increase in the cost of fresh food and non-alcoholic drinks, the rising price of restaurant meals and a surge in the price tag on women’s clothes for reversal in a recent decline in inflation.The ONS blamed a sharp increase in the cost of fresh food and non-alcoholic drinks, the rising price of restaurant meals and a surge in the price tag on women’s clothes for reversal in a recent decline in inflation.
The salad crisis, which resulted in empty shelves once occupied by tomatoes, peppers and cucumbers, was highlighted by the ONS as the driving force behind the rise in fresh food costs. The salad crisis, which resulted in empty shelves once occupied by tomatoes, peppers and cucumbers, was highlighted by the ONS as the driving force behind the rise in fresh food costs. The cost of vegetables rose 18% in the year to February – the highest rate since February 2009.
It said: “The largest upward effect came from vegetables, where prices rose in the month to February 2023 by more than a year earlier. There have been media reports of shortages of salad produce and other vegetables, reportedly because of bad weather in southern Europe and Africa, and the impact of higher electricity prices on produce grown out of season in greenhouses in the UK and northern Europe.” Rising food prices have also pushed up inflation in the last month in France, Spain and Germany, though at much lower levels than in the UK.
These price movements resulted pushed the cost of vegetables up by 18% in the year to February 2023, the highest rate since February 2009. The ONS chief economist, Grant Fitzner, said: ““Food and non-alcoholic drink prices rose to their highest rate in over 45 years with particular increases for some salad and vegetable items as high energy costs and bad weather across parts of Europe led to shortages and rationing.”
The ONS chief economist, Grant Fitzner, said: “Food and non-alcoholic drink prices rose to their highest rate in over 45 years with particular increases for some salad and vegetable items as high energy costs and bad weather across parts of Europe led to shortages and rationing.” Core inflation, which strips out volatile items such as food and energy, also increased sharply to 6.2% in February, up from 5.8% the previous month, exceeding economists’ expectations of a slowdown to 5.7%.
Energy prices also played a part, though to a lesser extent than a year ago, pushing down the cost of transport. The increase in the price of services is likely to fuel concerns that large corporations have protected their margins, using the cost of living crisis to “disguise price rises”. The Unite union general secretary, Sharon Graham, has accused companies of “greedflation” after it was revealed that several large companies, including Nestlé and Procter & Gamble, have increased profits and margins over the last year.
Energy prices also played a part in the inflation figures, though to a lesser extent than a year ago, pushing down the cost of transport. Britain remains one of the countries most dependent on imported food and energy in the industrial world.