UK inflation rate hits new high; read these 4 charts

UK inflation rate hits new high; read these 4 charts

World News

Inflation in Britain hit a record high of 9.1% in May, said UK’s statistical agency in a report released on Wednesday.

The numbers weren’t unexpected. Earlier in May, the chief economist of the Bank of England said in a speech that inflation is expected to rise to double digits in the fourth quarter of 2022. The bank said that inflation is forecast to reach 11% this year after which it will fall to around 2% by 2024.

The rise in inflation has had a ripple effect throughout the British economy, pushing up the cost of living and affecting the prices of food, fuel and entertainment options. The Bank of England has attributed it to the increased spending on goods during the pandemic and the spike in energy prices due to the Russian invasion of Ukraine.

Here are four charts to help make sense of the soaring inflation and its effect on life in Britain.

1. Inflation across years

According to UK’s Office for National Statistics, the inflation rates, which had been following an upward trajectory, rose by 9.1% in the 12 months to May 2022, as compared to 9% in April and 7% in March.

(Inflation is the rate of increase in prices over a period of time. For instance, if a product which cost Rs. 100 costs Rs. 110 after a certain period of time, the inflation for that period is 10%.)

“This is the highest CPI 12-month inflation rate in the National Statistic series, which began in January 1997. Indicative modelled consumer price inflation estimates suggest that CPI would last have been higher around 1982, where estimates range from nearly 11% in January down to approximately 6.5% in December,” the ONS said in its report.

The UK has seen inflation fall below zero per cent thrice in 2015. It fell to –0.1% in April 2015 but went on to pick up slightly in the next four months. It again fell to -0.1% in September and October 2015 before picking up. The negative inflation was attributed to the fall in commodity prices globally, including that of food and fuel, reported The Guardian.

2. Change in price of commodities

Prices in commodities have increased significantly in May, according to the latest report from the Office for National Statistics. The price of petrol and diesel have gone up by 30.4% and 37.2% respectively, compared to the prices at the same time last year.

Meanwhile, the price of software, personal computers and mobile phone equipment has fallen significantly.

3. Wages

Even as inflation soars, wages in the UK have fallen drastically. Excluding bonuses and after adjusting for inflation, the average annual growth in weekly wages fell by 4.5% in April 2022, reported the Office of National Statistics. This is the biggest fall in earnings since comparable records began in 2001, said a report in The Guardian.

4. House prices

Average house prices have increased by 12.4% in April, with a recorded average price of £281,000 in April 2022. This is £31,000 higher than the house prices at the same time last year, said the Office of National Statistics report. The prices have increased since mid-2020, rising from a 12-month percentage change of 1.7% in July 2020 to an all-time high of 13.3 % in June 2021.

However, this climb in prices cannot be blamed solely on inflation. It could also be attributed to a change in UK’s property tax rules which came into effect in July 2020. “These changes in the tax paid on housing transactions may have allowed sellers to request higher prices as the buyers’ overall costs were reduced,” said the government report.

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