U.S. markets close in 4 hours 14 minutes
  • S&P 500

    4,062.39
    -14.18 (-0.35%)
     
  • Dow 30

    34,354.14
    -40.87 (-0.12%)
     
  • Nasdaq

    11,419.10
    -63.35 (-0.55%)
     
  • Russell 2000

    1,880.26
    -1.41 (-0.08%)
     
  • Crude Oil

    81.21
    -0.01 (-0.01%)
     
  • Gold

    1,806.10
    -9.10 (-0.50%)
     
  • Silver

    23.28
    +0.44 (+1.94%)
     
  • EUR/USD

    1.0527
    -0.0001 (-0.01%)
     
  • 10-Yr Bond

    3.5900
    +0.0610 (+1.73%)
     
  • GBP/USD

    1.2288
    +0.0031 (+0.26%)
     
  • USD/JPY

    134.8850
    -0.4210 (-0.31%)
     
  • BTC-USD

    16,926.23
    -64.36 (-0.38%)
     
  • CMC Crypto 200

    401.62
    +0.20 (+0.05%)
     
  • FTSE 100

    7,560.76
    +2.27 (+0.03%)
     
  • Nikkei 225

    27,777.90
    -448.18 (-1.59%)
     

UK inflation hits 10.1% as food prices hit 40-year high

Inflation soars to new 40-year high as cost of living crisis deepens
Inflation soars to new 40-year high as cost of living crisis deepens. Photo: Getty

UK inflation has surged to a fresh 40-year high, as July’s inflation rate hit 10.1%, according to the Office for National Statistics (ONS).

The Consumer Prices Index (CPI) rose to 10.1% in the 12 months to July, up from 9.4% in June and remaining at the highest level since 1982.

The figure is higher than the 9.8% figure expected by most economists and represents a further squeeze on people's pockets.

Inflation is soaring
Inflation is soaring

Read more: UK inflation: Food and energy bills to cost more than 50% of your pay

Core inflation, which strips out volatile food and energy costs, hit 6.2%. The retail price, which is used for pricing some public services including train fares, rose to 12.3%.

The ONS said the increase stemmed principally from the higher cost of food last month.

"The largest upward contributions (of 0.04 percentage points) came from bread and cereals, and from milk, cheese and eggs — where prices for shop-bought and delivered milk, cheddar cheese and yoghurts (or fromage frais) increased notably.

"Other smaller effects (of 0.03 percentage points) came from meat (notably from cooked ham and bacon), vegetables including tubers, and sugar, jam, syrups, chocolate and confectionery," the ONS said.

Other small upward contributions to the inflation rates came from appliances and products for personal care as toilet rolls, toothbrushes, hair straighteners and deodorants became more expensive between June and July, compared with price falls this time last year.

Data shows food was the biggest factor behind the jump in prices in July. Table: ONS
Data shows food was the biggest factor behind the jump in prices in July. Table: ONS

Households are expected to come under further pressure this autumn from a fresh rise in energy bills, which the Bank of England forecasts will drive inflation above 13% and trigger a long recession as families rein in their spending.

On Monday, figures from the ONS showed workers had suffered a record real-term pay slump in the face of spiralling prices.

The inflation figure will ramp up pressure on the government to take further action to tackle the cost of living.

Watch: What is a recession and how do we spot one?

Chancellor Nadhim Zahawi said: “I understand that times are tough, and people are worried about increases in prices that countries around the world are facing.

“Although there are no easy solutions, we are helping where we can through a £37bn support package, with further payments for those on the lowest incomes, pensioners and the disabled, and £400 off energy bills for everyone in the coming months.

“Getting inflation under control is my top priority, and we are taking action through strong, independent monetary policy, responsible tax and spending decisions, and reforms to boost productivity and growth.”

Despite the grim economic outlook, Boris Johnson's spokesperson has said there will be no further government intervention before the Tory leadership race ends on 5 September, when either Rishi Sunak or Liz Truss will become the new prime minister.

Read more: UK workers see record drop in pay amid rising bills

Rocio Concha, Which? director of policy and advocacy, said: “These figures underline the scale of the cost of living crisis and make clear that millions of people face a dire financial situation in the months ahead. With bills set to rise further, it’s clear that the current level of cost of living government help will not be sufficient.

“Ministers must now move quickly to increase the amount of support for those who are struggling, and businesses in essential sectors, such as supermarkets, energy and telecoms, must also do everything they can to make sure customers are getting a good deal and extra support if they need it.”

Inflation is expected to fall back a little in August; however, according to estimates it could soar to 13.3% in October when the energy price cap rises again. The Bank of England thinks this could push the UK into a recession.

Read more: Energy bills: 3 key questions about Labour’s £29bn price cap plan

Helen Dickinson, chief executive of the British Retail Consortium, said: “Consumers had little respite from the cost of living squeeze as prices rose again in July. Soaring household bills and transport costs remain the biggest headache, holding back discretionary spending across the UK as real incomes continued to fall.

“With inflation showing little sign of slowing, retailers could face a 10% hike in their business rates bill in the coming year. This would impose a cost-nightmare of hundreds of millions of pounds on retailers who are already struggling with razor-thin margins. The next prime minister must act, freezing the multiplier to avoid placing a further burden on retailers, and the customers they serve.”

General secretary of the Trades Union Congress Frances O’Grady urged the government to help UK households. Se said: “Families are facing a cost of living emergency. Ministers must cancel the catastrophic rise to energy bills this autumn. And to reduce future inflationary pressures and make energy more affordable, they should bring energy retail into public ownership.

“To help people with the cost of living this winter, government should bring forward increases to universal credit and the national minimum wage.

“And companies that were supported by taxpayer through the pandemic must step up to help too. They should show profit restraint to help keep prices down and to prioritise pay rises for staff.”

Boris Johnson is facing criticism for a lack of action while holidaying as rising food prices pushed inflation to another 40-year high.

Asda chairman Lord Rose criticised a “horrifying” absence of fresh support, saying: “The captain of the ship is on shore leave — nobody is in charge at the moment.”

The Conservative peer questioned when an emergency budget will be brought forward as he warned that “inflation isn’t sitting there waiting for us” as the cost of living crisis deepened.

The National Institute of Economic and Social Research is now predicting inflation to peak around 13%.

Urvish Patel, NIESR economist, said: "The surge in UK inflation was mainly accounted for by food and non-alcoholic beverages which contributed 0.32 percentage points to the monthly change in the headline figure. Underlying inflation increased in all of the 12 UK regions in July, although inflation in the East Midlands is now the highest at 8%.

"Considering the ongoing surge in food prices and the expected hike in the energy price cap in October 2022, we now expect annual CPI inflation to peak close to 13% at the end of 2022 and start of 2023."

Watch: How does inflation affect interest rates?