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A woman holds a basket of goods in a supermarket
Soaring food prices contribute to increases in inflation. Photograph: Matthew Horwood/Getty Images
Soaring food prices contribute to increases in inflation. Photograph: Matthew Horwood/Getty Images

UK inflation rises to 9.1%, its highest rate in 40 years

This article is more than 1 year old

Headline CPI rate will add to cost of living crisis, fuelled by rises in food and transport costs

If UK inflation feels bad now, the grim news is worse is on the way

British households are facing the most severe pressure from rising living costs in 40 years after a fresh rise in inflation in May, amid record prices for petrol and the soaring cost of food.

The Office for National Statistics said inflation as measured by the consumer prices index rose from 9% in April to 9.1% last month, a level unseen since February 1982, and the highest rate in the G7 group of wealthy nations.

Although matching expectations in the City for a modest rise, experts warned the measure for the annual jump in living costs was likely to increase further in coming months as households come under growing pressure from rising prices at the petrol pumps.

Inflation is being fuelled by food and non-alcoholic drink prices, which are rising at the fastest annual rate since 2009, the ONS said, with the most dramatic increases seen in the cost of bread, cereals and meat.

inflation drivers

Soaring prices for petrol and diesel also drove up inflation in May, adding to the pressure on motorists and business costs with a 32.8% jump in motor fuels over the past year – the biggest annual increase in records dating back to 1989.

Prices keep climbing, hitting a fresh record on Tuesday, with the average price of petrol increasing to 189.33p according to the RAC. The cost of filling up a typical family car rose above £100 for the first time this month. Diesel also reached another new high this week, hitting 197.11p.

The ONS said the retail prices index, which is typically higher than the CPI, rose 11.7% in May.

uk inflation

Last week, the Bank of England said the CPI measure of inflation was on track to reach 11% later this year amid soaring gas and electricity prices. Wednesday’s data will be seized on by rail unions who are locked in a bitter dispute with ministers over pay, as they push for wages to keep pace with the cost of living.

Millions of commuters were forced to stay home or struggle through traffic to work on Wednesday, as trains were disrupted before a second day of rail strikes on Thursday, in the biggest coordinated industrial action on British trains since the 1980s. The country is bracing for a wave of disruption, with unions representing teachers and Royal Mail staff announcing this week they were considering taking industrial action over pay.

The average retail prices of selected common food items have grown significantly compared with last year

Boris Johnson has warned workers against pushing for bigger wage increases to prevent a “wage-price spiral” from taking hold that would keep inflation persistently high for longer.

However, the government has decided to allow pensioners a full inflation-linked increase, by restoring the pensions triple lock. The move was criticised on Wednesday by the former Conservative Treasury minister Jim O’Neill, who said it was “ludicrous” to protect pensioner incomes while younger people suffered.

Unions argue that companies raising their prices are responsible for pushing the inflation rate higher.

Sharon Graham, the general secretary of Unite, said: “Runaway profits are driving the inflation that is threatening a national pay cut and yet the vast majority of politicians remain silent.”

Rachel Reeves, the shadow chancellor, said: “Though rapid inflation is pushing family finances to the brink, the low-wage spiral faced by many in Britain isn’t new. Over the last decade, Tory mismanagement of our economy has meant living standards and real wages have failed to grow.”

The latest figures from the ONS showed the price of goods leaving factory gates rose at the fastest rate since September 1977, when Elvis Presley was No 1 in the charts a month after his death.

ppi

The 15.7% rise in producer price inflation – which could feed through to consumers over the coming months if retailers choose to pass on higher wholesale prices – was driven by widespread food price rises and raw material costs surging at the fastest rate on record, including for iron and steel.

Prices for furniture, household equipment and maintenance rose by 11%, the biggest annual increase since 2006.

Economists said inflation would rise further in the coming months, fuelled by fresh records for petrol and diesel in June, and rising food prices would hurt the poorest families because they spent a larger proportion of their income on essentials than wealthy households did.

Jack Leslie, senior economist at the Resolution Foundation, said poorer families were already experiencing personal inflation rates in the double digits. “The latest inflation is worryingly high, but will feel low for consumers as it predates the big spike in petrol prices over the past month.”

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The chancellor said the government was using all the tools at its disposal to bring inflation down and combat rising prices. “I know that people are worried about the rising cost of living, which is why we have taken targeted action to help families, getting £1,200 to the 8 million most vulnerable households,”Rishi Sunak, said.

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