The rate of inflation has risen for the ninth month in a row in Britain, hitting a 40-year-high of 9.4% in the 12 months to June – up from 9.1% in May, according to the Office for National Statistics.
The ONS said that the figure was driven in part by a 42% year-on-year increase in petrol prices.
In recent days, British companies pared back profits and earnings forecasts as consumers tightened their belts, with delivery unicorn Deliveroo (GB:ROO) cutting its revenue guidance.
As consumers shun big-ticket purchases, furniture retailer Made.com (GB:MADE) also slashed its earnings and sales forecasts for the coming months.
Petrol and food behind inflation rise
Grant Fitzner, chief economist at the Office for National Statistics (ONS), said: “Annual inflation again rose to stand at its highest rate for over 40 years.
“The increase was driven by rising fuel and food prices, these were only slightly offset by falling second-hand car prices.
“The cost of both raw materials and goods leaving factories continued to rise, driven by higher metal and food prices respectively.
“These increases saw raw materials post their highest annual increase on record, with manufactured goods at a 45-year high.”
Interest rate rise on cards
This week, the Bank of England Governor Andrew Bailey suggested that a half-point interest rate could be on the cards, and reiterated his commitment to reducing inflation to the Government’s target of 2%.
He said, “Let me be quite clear: there are no ifs or buts in our commitment to the 2% inflation target. That’s our job, and that’s what we will do.”
Speaking to the Guardian, economists at Daiwa predicted that inflation would begin to fall in the new year.
The economists said, “We expect core inflation to rise back firmly above 6.0% year-on-year over the next few months. And with household energy bills to be hiked again in October, headline inflation is currently set to peak above 10.5%Y/Y, and remain above 10%Y/Y at least until January before falling back over subsequent months.”
“With yesterday’s data highlighting that the labour market remains tight, no surprise therefore that BoE Governor Bailey yesterday evening confirmed that a 50bps hike in Bank Rate will be discussed by the MPC in August, and that a programme of active Gilt sales is likely to be underway from the autumn.”
