LONDON – Consumer prices in the United Kingdom have risen at the fastest pace in almost 30 years as higher costs for energy, transportation, food and furniture squeezed household incomes.
Inflation accelerated to 5.4% in the 12 months through December, up from November's 5.1%, the Office for National Statistics said Wednesday. Last month's annual figure is the highest since March 1992, when inflation stood at 7.1%.
Economists warned that inflation is likely to rise further in the coming months as tax increases and the full impact of a recent surge in energy prices hit consumers. Gas and electricity bills for millions of households are expected to balloon by 50% or more in April when a semi-annual adjustment in the energy price cap takes effect.
“What is of particular concern is that the change from November has come mainly from an increase in the price of food,” said Kitty Ussher, chief economist for the Institute of Directors. “Not only does this provide additional evidence that inflation is becoming endemic rather than transitory, it also bodes ill for households facing multiple rises in the cost of living this spring.”
Prices are rising in many countries as the global economy recovers from the coronavirus pandemic, boosting demand for energy and other raw materials and driving wages higher.
U.S. consumer prices rose 7% in the 12 months through December, pushing inflation to the highest level in nearly 40 years. It accelerated last month to a record 5% in the 19 European Union countries that use the euro.
While prices are rising at the fastest pace in decades, inflation remains well below the levels of the early 1970s when a global energy crisis triggered double-digit increases.
The latest U.K. figures will increase pressure on the government to shield low-income families from price increases. Critics have called on Prime Minister Boris Johnson to provide more help with fuel bills and rethink a temporary 1.25% income tax increase to boost funding for the National Health Service and social care.
Treasury chief Rishi Sunak made no attempt to downplay the numbers, highlighting 12 billion pounds ($16 billion) in spending that the government previously authorized to help families with the cost of living.
“I understand the pressures people are facing with the cost of living, and we will continue to listen to people’s concerns as we have done throughout the pandemic," he said.
Jonathan Reynolds, the opposition Labour Party’s spokesman on business issues, said the government isn’t doing enough because Johnson is focused on saving his job amid allegations that officials held boozy parties during the pandemic while the rest of the country was in lockdown.
“The government is struggling to get through a scandal of its own making, and we’re not talking about the things that really do matter to the country,” Reynolds told the BBC. “We’ve got to see a response from government to the squeeze on the cost of living that the country is facing.”
Soaring energy prices, supply chain backups and other issues led the Bank of England to raise interest rates last month for the first time in more than three years, increasing costs for borrowers.
The central bank, which tries to keep inflation below 2%, raised its benchmark interest rate to 0.25% from a record low 0.1%.
Shafiq Shabir, head of electronic trading at the broker Intertrader, said interest rates may climb to 1% by the end of this year following the “eye-watering” inflation figures.
“Wage growth is expected to sit at 4.5% for 2022, meaning many will see their real-term incomes fall behind the increasingly tight cost of living.”