The biggest rate of grocery inflation in forty years pulls the headline rate back up to July’s level, but state pension and benefit claimants must wait to see if the government increases payouts by the CPI measure.
Inflation reached 10.1% in September, according to official data, as the economy reeled under the consequences of increased prices and the mini-budget.
The Office for National Statistics (ONS) said that the consumer prices index (CPI) jumped from a 9.9% annual rate in August to match July’s 40-year high.
The analysis revealed that food prices contributed the most to price increases, while gasoline prices contributed the most to price decreases.
Bread and cereals, meat products, milk, cheese, and eggs led the increases, according to the ONS, which noted that the rate of food price increases was the fastest since April 1980, at an annual rate of 14.5%.
It is primarily the effects of Russia’s war in Ukraine and the Western sanctions adopted in response that have caused energy and other commodity prices to increase and be passed on to consumers.
As a result of the financial markets’ harsh rejection of the mini-budget tax and spending giveaway of September 23, households and businesses face increased uncertainty in the future.
Before the “medium-term fiscal plan” and review of the situation from the Office for Budget Responsibility on October 31, incoming Chancellor Jeremy Hunt has only 12 days left to find measures to boost economic confidence and close Britain’s financing gap (OBR).
Impacts on benefits and pensions
Lack of clarity over the government’s spending plans leaves millions of retirees and welfare recipients in uncertainty.
This is because the inflation rate in September has ramifications for how their payouts are adjusted.
If the government agrees to increase benefits by the rate of inflation, the increase will take effect in April of next year.
The September number is also used to evaluate the triple-lock pension obligation.
The triple-lock stipulates that pensions will increase by the greater of average earnings, CPI inflation based on September’s rate, or 2.5%.
With current average earnings of 5.4%, the triple lock should ensure pensions increase by the rate of inflation in April of next year.
However, Downing Street signaled on Tuesday that ministers may abandon their pledge to the triple lock as Mr. Hunt seeks to recoup costs.
The Financial Times reported on Wednesday morning that he may also take a larger part of energy industry revenues to help balance the budget.
Mr. Hunt’s announcement that the universal energy price guarantee, which capped wholesale rates, would expire in April and likely become more targeted in the following months has heightened the uncertainty around household budgets.
It threatens to add to inflation next spring if the majority of bill-payers must spend approximately £4,000 yearly for energy prices, as predicted by the energy price ceiling.
The chancellor stated in response to the inflation figures: “I am aware that families across the nation are battling with rising energy costs and prices.
“This administration will prioritize assistance for the most disadvantaged while maintaining broader economic stability and fostering long-term prosperity that will benefit everybody.
“We have taken quick action to protect households and businesses this winter from substantial increases in their energy bills, with the government’s energy price guarantee holding down peak inflation.”
The ONS’s director of economic statistics, Darren Morgan, commented on the current state of prices: “The increase was led by food prices, which witnessed their greatest yearly gain in over 40 years, as well as hotel prices, which rose after declining at this time last year.
“These increases were largely offset by ongoing declines in the cost of gasoline, with airline rates decreasing more than normal for this time of year and second-hand automobile prices increasing less sharply than last year’s substantial gains.
While still historically high, corporate costs are beginning to climb more slowly, with crude oil prices decreasing in September.
