Soaring food prices pushed UK consumer price inflation to a 40-year high of 9.1% last month, the highest rate out of the Group of Seven countries and one which underlines the severity of the country’s cost-of-living crunch.
The reading was up from 9.0% in April and matched the consensus of a Reuters poll of economists. Records from the Office for National Statistics show May’s inflation was the highest since March 1982 – and worse is likely to come.
Prices for food and non-alcoholic drinks rose by 8.7% in annual terms in May – the biggest jump since March 2009 and making this category the biggest driver of annual inflation last month.
Annual core inflation – which strips out food and energy prices to give an idea of domestically generated cost pressure – fell for the first time since September to 5.9% from 6.2%, a lower-than-expected reading.
“The Bank of England may indeed gain some hope from the fact that core price pressures are subsiding (but) we doubt this … will be enough to avert further rate rises in the coming months,” Sandra Horsfield, an economist from Investec.
Overall consumer prices in the UK rose by 0.7% in monthly terms in May, the ONS said, a little more than the 0.6% consensus.
Costs paid by UK factories for materials and energy – a key determinant of prices later paid by consumers in shops – were 22.1% higher in May than a year earlier, the biggest increase since these records began in 1985, the ONS said.
Sterling, one of the weakest currencies against the U.S. dollar this year, fell below $1.22, down 0.6% on the day, before later recovering.
UK’s headline inflation rate in May was higher than in the United States, France, Germany and Italy. While Japan and Canada have yet to report consumer price data for May, neither is likely to come close.
The Bank of England said last week that inflation was likely to remain above 9% over the coming months before peaking at slightly above 11% in October when regulated household energy bills are due to rise again.
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