UK inflation hits highest level since March 2012
ONS records the largest monthly Consumer Price Index rise on record
The FTSE 250 was trading down on Wednesday as markets reacted to ongoing inertia in the United States and Asia, UK prime minister Boris Johnson’s ongoing cabinet reshuffle and the latest record-breaking inflation data.
According to new figures from the Office for National Statistics (ONS), the UK’s Consumer Prices Index (CPI) hit 3.2% in August, having stood at 2% in July.
The state statistics body maintained that the “the largest ever recorded increase” since the CPI National Statistic 12-month inflation rate series began in 1997 was “likely to be a temporary change.”
Food and drink
The rising cost of food and non-alcoholic drinks contributed significantly to the CPI reaching its highest level since March 2012. Prices in the sector have risen by 1.1% since August, their highest growth rate in 13 years.
The ONS argued that the rapid rise was partly due to the distortion in figures wrought by the government’s Eat Out to Help Out scheme, which subsidised restaurants after the first lockdown. The scheme offered customers half-price food and drink at eateries between Monday and Wednesday in August of 2020. Without it, the body said that the CPI would have been 0.4% lower.
Substantial price rises were also recorded on a range of other goods and services, however, including secondhand cars, supermarket groceries, computer games and petrol.
Manufacturers’ input price inflation rose by 0.6% between July and August to 11%, a decade high. Factory gate prices also jumped to their highest level in almost ten years, rising by 0.8% to 5.9%.
Pressures on the UK economy
With businesses struggling to recruit amid a sizable worker shortage and supply chains disrupted as the British economy continues to adapt to life outside the European Union, rising costs are thought to be being handed down to consumers.
Andy Haldane, the central bank’s former chief economist, voiced his doubt about whether high inflation would prove to be transitory before he stepped down earlier this year, stating: “By the end of this year, I expect UK inflation to be nearer 4% than 3%.”
By mid-afternoon, the FTSE 100 was trading up by 0.1%, while the FTSE 250 stood 0.8% lower at 23493, a 5-week low.