UK households feeling squeeze due to stubbornly high inflation

(Xinhua) 10:15, June 22, 2023

LONDON, June 21 (Xinhua) -- The latest official figures showed on Wednesday that the United Kingdom's (UK) inflation in May remained stubbornly high, and amid still soaring prices, households are feeling the squeeze.

The UK's consumer price index (CPI) rose by 8.7 percent in the 12 months to May, unchanged from that in April, the Office for National Statistics (ONS) said.

"After last month's fall, annual inflation was little changed in May and remains at a historically high level," ONS Chief Economist Grant Fitzner said.

The cost of airfares rose more than a year ago and is at a higher level than usual for May, Fitzner noted, adding that rising prices for second-hand cars, live music events and computer games also contributed to inflation remaining high.

Food price inflation remains high, but the rate has eased slightly this month, with costs rising more slowly than this time last year.

Core CPI, excluding energy, food, alcohol and tobacco, rose by 7.1 percent in the 12 months to May, up from 6.8 percent in April, and reaching the highest since March 1992, according to the ONS.

The services inflation jumped from 6.9 percent in April to 7.4 percent in May, also reaching the highest since March 1992.

May's CPI figures ratchet up the pressure on the Bank of England's (BoE) Monetary Policy Committee to increase the benchmark interest rate substantially further over the coming months, Samuel Tombs, chief UK economist at Pantheon Macroeconomics consultancy, said.

"Today's inflation figure will be a bitter pill to swallow for consumers, investors and the government," Marcus Brookes, chief investment officer at investment service Quilter Investors, said.

The UK has been in the grip of high inflation for more than a year. This has eroded people's real income. When adjusted for inflation, average total pay, which includes bonuses, among UK employees fell 3 percent in the January-March period, the ONS said in May.

"Sticky inflation is extending the cost-of-living crisis for everyone in Britain, and hardening the mortgage crunch for the 7 million households who have a mortgage," James Smith, research director at the Resolution Foundation, said.

As the latest CPI data will reinforce market expectations of how high interest rates will go, "this is bad news for anyone with a mortgage, who will be looking out for more positive signals before their current deal comes to an end," Smith added.

An Ipsos survey in May showed economic concerns continue to be seen as the most important issues facing Britain. Another survey published by the market research firm in June found six in ten people think the UK government is doing a "bad job" easing the cost of living and giving people financial security.

The inflationary squeeze on households is translating into increased demand for charity support, Jansev Jemal, director of research and policy at charity Pro Bono Economics (PBE), said.

A recent survey by PBE found that nearly half of large and medium-sized charities do not think they will be able to meet demand over the next three months.

"Faced with significant demand and eroding income due to inflation, charities are also having to cope with dwindling volunteer numbers -- six in ten charities say volunteer recruitment over the past year has been difficult," Jemal added. 

(Web editor: Peng Yukai, Kou Jie)


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