Economy  

Inflation hits 41-year high of 11.1%

Inflation hits 41-year high of 11.1%
 

Rising energy and food prices drove inflation to a 41-year high in October, confounding analysts’ expectations.

The consumer prices index hit 11.1 per cent in the year to October, according to the Office for National Statistics, up from 10.1 per cent in September.

RPI rose to 14.2 per cent.

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The ONS said gas and electricity prices made the largest upward contribution to the change, despite the energy price guarantee capping the amount consumers can be charged per kilowatt hour of energy used.

Fuel prices rose by 24.7 per cent between September and October, though the ONS noted that this would have been closer to 75 per cent without the energy price guarantee which would have pushed inflation to 13.8 per cent.

The Bank of England had previously warned this measure, which is due to last until March 31 next year, would be inflationary.

Households are, on average, paying 88.9 per cent more for their electricity, gas, and other fuels than they were a year ago, with domestic gas prices seeing the highest increase in cost.

Chief economist at the ONS, Grant Fitzner said: “Over the past year, gas prices have climbed nearly 130 per cent while electricity has risen by around 66 per cent.”

“Increases across a range of food items also pushed up inflation…There was further evidence that costs facing businesses are rising more slowly, driven by crude oil and petroleum prices.”

The second largest contribution to the rise came from the price of food and non-alcoholic drinks, which rose by 16.4 per cent in the period, the highest since September 1977 according to the ONS.

A drop in the cost of fuel and second-hand cars lowered the overall rate of inflation.

Chancellor Jeremy Hunt said the aftershock of Covid and Putin’s invasion of Ukraine is driving up inflation in the UK and around the world.

"This insidious tax is eating into pay cheques, household budgets and savings, while thwarting any chance of long-term economic growth. 

“We cannot have long-term, sustainable growth with high inflation."

The chancellor will tomorrow (November 17) set out the Autumn Statement, which is expected to contain a number of tax rises and tax band freezes.

"It is our duty to help the Bank of England in their mission to return inflation to target by acting responsibly with the nation’s finances," Hunt said.

"That requires some tough but necessary decisions on tax and spending to help balance the books."

The rate of inflation for low-income households was 11.9 per cent in the year to October, while high-income households experienced a rate of 10.5 per cent, as energy and food costs have more bearing on the inflation experienced by lower-income households, the ONS said.

Investment strategist at Evelyn Partners, Rob Clarry, said: “Today’s report provided another disappointing set of inflation data…Despite this challenging headline figure, we do still expect inflation to ease into next year.”