Households in the UK have been warned to prepare for the sharpest annual rise in the cost of living since the early 1980s after a larger-than-expected jump in official inflation to 7% amid record price increases. gasoline.
Economists say they expect the government’s preferred measure for the annual increase in the cost of living – the consumer price index (CPI) – is set to exceed 9% this month amid a record jump in energy bills and rising weekly store costs.
Highlighting the scale of the deterioration in the cost of living in Britain, the last time CPI inflation was higher was in February 1982 during Thatcher’s first government, when it reached 10.4%.
The latest figures from the National Statistics Office (ONS) show that inflation rose more than expected in March to 7%, rising from 6.2% in February due to rising fuel, energy and food prices in the beginning of the year.
With a massive rise in prices in the economy, the biggest increase came in the cost of filling the pump after Russia’s invasion of Ukraine brought global oil prices close to record levels amid fears of supply disruptions and sanctions.
Average petrol and diesel prices rose to a record 160.2 pence and 170.5 liters respectively, rising by more than 30% in the last year, the biggest annual increase since 1989.
Prices for restaurants and hotels also rose sharply in March, as they were not available last year during the blockade, while there were increases in a number of different foods as the price of the weekly store rose.
The ONS said the last time inflation was higher was in March 1992, when the CPI was 7.1%. As inflation exceeds City economists’ expectations of 6.7% for the month, experts said the measure of rising living costs is now likely to rise by more than expected in the coming months.
Economists at Goldman Sachs and Deutsche Bank said inflation is likely to reach more than 9% in April, probably to 9.2% due to rising energy bills and a disruption to the global supply chain, exacerbated by Covid and Russia’s war in Ukraine. .
The Bank of England warned in early March that inflation was set to reach 8% this month and could peak near 10% later this year if the rise in global wholesale energy prices since the Russian invasion , save.
Threadneedle Street is likely to come under strong pressure to raise interest rates when the monetary policy committee meets early next month, with inflation now more than three times above the 2% target set by the government.
According to the latest snapshot from the ONS, rising gas and electricity bills contributed to pressure on household living expenses in March. However, families are expected to face more tensions this month after a 54% rise in Ofgem’s energy price cap in early April to reflect the rise in wholesale markets, where oil and gas prices have quadrupled in recent years. year even before the Russian invasion of Ukraine.
“The latest rise in inflation will not be the last,” said Alpes Palea, a leading economist at the CBI lobby business group. “The result will be even higher business costs and a deep reduction in the cost of living for households.
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Official data on Monday shows that average wage growth has failed to keep pace with rising living costs. Jack Leslie, a senior economist with the Resolution Foundation, said the cost of living crisis was about to be the biggest drop since the mid-1970s.
“The main scale of this inflation-induced decline in living standards makes it even more remarkable how little support the chancellor has given in his spring statement, a decision that will certainly have to be reconsidered before the autumn budget.
Chancellor Rishi Sunak blamed rising costs for global pressure on supply chains and energy markets, which could be exacerbated by Russian aggression in Ukraine.
“I know this is a worrying time for many families, which is why we are taking action to ease the burden by providing support worth around £ 22 billion this financial year, including the most vulnerable through our household support fund,” he said. he. “We also help as many people as possible to work – the best way for families to gain economic security in the long run.”