UK inflation rose in July more than expected to its highest level in 40 years, intensifying pressure on consumers and increasing pressure for action by the government and the Bank of England.
The Consumer Price Index (CPI) rose 10.1% in July from a year earlier after rising 9.4% in the previous month, the Office for National Statistics reported Wednesday. The reading was higher than expected by both the Bank of England and private sector economists.
Core inflation – excluding energy, food, alcohol and tobacco – accelerated to 6.2% from a year ago in July, more than the 5.9% reading economists had expected.
Economists are increasingly pessimistic about the UK, with the risk of a recession now seen as more likely than not due to rising cost pressures. The Bank of England expects the recession to start in the fourth quarter, and last until early 2024.
The central bank expects inflation to exceed 13% later this year when regulators allow energy bills to rise again. This would be the worst reading since September 1980, when the Margaret Thatcher government struggled to control the wage-price spiral.
Separate figures showed pressure on pipeline prices appeared to be easing, with fuel and raw materials prices rising just 0.1% in July, the smallest monthly increase since December. This is mainly due to lower crude oil prices during the month.
It left input prices up 22.6% y/y, just below the record pace set in June. Production prices rose 1.6% on a monthly basis and 17.1% from the previous year, the largest annual increase since 1977.
Meantime, Economists blamed Russia for rising inflation because it has cut natural gas supplies and increased electricity costs across Europe.