UK inflation climbs to 40-year high

Date : 23 June 2022

ONS has released its latest inflation data up to May 2022. This is the highest year-on-year inflation level for 40 years, recording 9.1% on the CPI index and 7.9% on the CPIH index. The older RPI measure of inflation reached 11.7% up from 11.1% to February 2022.

Inflation has stayed relatively level when compared to April, up only 0.1% on the CPI measure. This is principally because the energy price cap, the key contributor to inflation, was raised in April and now remains at the same price for the next 6 months.

As shown in Figure 1, price rises in ‘food and drink’ continue to accelerate, up 2% in May to 8.7% year on year. At the same time last year ‘food and drink’ inflation was -1.3%.

Last week IGD forecast that food inflation is likely to reach 15% in late summer hitting the most vulnerable households hardest. For more information, please see here.

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Figure 2 shows estimated contributions to RPI - here, we have used RPI because it gives broader coverage of household costs than CPI.

The contribution of food retail to inflation, shown as the yellow bar, saw the largest growth of all sectors. IGD’s latest Shopper Confidence Index indicates this is having a material impact on shoppers.

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Inflation is being driven by supply-side factors, especially energy prices. This is feeding into food production margins, as illustrated in the chart below. Input prices for food producers continue to rise dramatically, up 2.8% in May. IGD expects these rises to continue to feed into retail prices in the coming months.

Click chart to enlarge

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