UK inflation is at 11.1%, the highest in more than 40 years

Britain’s cost-of-living crisis worsened in October, with consumer prices rising 11.1 percent from a year earlier, the highest in more than 40 years, and giving no relief to households struggling to keep up with sharp increases in food, heating and sanitation prices. Gas.

The higher-than-expected increase came after the annual inflation rate reached 10.1 percent in September. On a monthly basis, the consumer price index It rose 2 percent from September to October.

Despite a government subsidy scheme designed to protect homes and businesses from the ravages of soaring energy bills, gas and electricity prices have been the biggest driver behind the sharp rise in consumer prices, the Office for National Statistics said. Food prices also rose for the 15th straight month, as supermarkets continued to pass on increases in production costs.

“Stunningly, consumer prices jumped 2 percent in one month, which is equal to the Bank of England’s target for price increases over the course of a full year,” Jake Finney, an economist at PricewaterhouseCoopers, said in a note.

So-called core inflation — the annual rate excluding volatile items such as energy and food — remained the same in October as in the previous month, at 6.5 percent.

But Britain’s overall rate was again overtaken rate of 10.7 percent in the euro area, leading to the worst cost-of-living crisis in four decades. It comes as households and businesses grapple with the potential for prolongation Recession. British economy shrinkage of 0.2 percent between July and September compared with the previous three months, and central bankers warned of a “protracted” recession lasting up to two years.

Continuous cost increases are a particular concern for businesses, including the thousands of small businesses that make up the backbone of the British economy. “Far from peaking, inflation continues to rise,” the British Chambers of Commerce said in a statement. “We speak to thousands of companies who tell us this is not sustainable.”

A broader recession is expected to spread to the continent by the end of the year, as countries from France to Finland face the double whammy of rising inflation and slowing or declining growth. The Russian war in Ukraine, and retaliatory sanctions against Russia by European countries, have caused global fuel, food, and fertilizer prices to skyrocket.

wages in Britain It increased 5.7 percent In the third quarter, its fastest pace in 20 years, as people returned to the work force after pandemic lockdowns ended in Britain. But inflation is rising so quickly that it is outpacing those gains, leaving households struggling to keep up.

And some employment gains mask underlying instability, with many people returning to the labor market self employed Workers. When adjusting for higher prices, wages overall fell 2.7 percent in September.

To reduce inflation, the Bank of England is trying to curb economic growth with a series of interest rate increases. Earlier this month, the central bank raised interest rates by three-quarters of a point to 3 percent, the highest level since 2008. Analysts at ING said the bank is likely to raise interest rates by another half point in December.

But these moves put more financial pressure on homeowners already worried about rising costs, as they keep mortgage rates high and will have the effect of calming an already slowing economy. The cost of housing and home services jumped more than 26 percent in October compared to a year ago.

The rise in energy costs could have been worse. The statistics office said the increase in energy bills on October 1, part of a readjustment by the country’s energy regulator to reflect market prices, was expected to raise energy costs by about 75 percent. An outcry over the jump led to a government program freezing prices, which led to a 25 percent increase instead. That program, which was originally scheduled to run for two years for homeowners, is now set to expire on April 1.

Pantheon Macroeconomics, a research firm, said in a note to clients that inflation should slowly begin to decline starting next year as energy costs rise. The company said its overall business and living costs would continue to be “significantly dependent on the government’s approach to reducing energy prices”.

Bank of England Governor Andrew Bailey told MPs on Wednesday that he expects inflation to slow next year.

“Once we get through this winter, there should be a clear decline in inflation after that, and our expectations bring it back to target,” he said, referring to the bank’s inflation target of 2 percent.

The British economy is also suffering from a series of wounds inflicted by the ruling Conservative Party. Prime Minister, Rishi SunakHe made it clear that he intends to take a tougher approach to public finances after a period of turmoil under the previous leader, Les Truss, who pushed economic policies during a short-term period that led to financial turmoil in Britain.

On Thursday, Mr Sunak and the Chancellor of the Exchequer, Jeremy Hunt, are expected to announce tax increases and spending cuts along with a plan to reduce Britain’s debt.

The statement is expected to detail spending and tax policies in line with reducing Britain’s debt burden. It will be accompanied by projections from the Office for Budget Responsibility, an independent government watchdog that will assess the impact of government policies on the economy and public finances.