Consumer price inflation in the UK reached a 40-year high of 9.1 percent last month, the highest rate among the G7 nations and highlighting the depth of the cost-of-living crisis. Soaring food costs were a major factor in this increase.
The reading, which increased from 9.0 percent in April, was in line with the opinion of analysts surveyed by Reuters.
May’s inflation was the biggest since March 1982, according to historical data from the Office for National Statistics, and it’s expected to become worse.
Sterling, among the worst currency this year versus the US dollar, dropped below $1.22 on the day, losing 0.6 percent.
Given its high energy import cost and ongoing Brexit issues, which might further harm trade relations with the European Union, some investors believe that Britain faces a danger of both chronically high inflation and recession.
According to Jack Leslie, senior economist at the Resolution Foundation think tank, “with the economic future so uncertain, no one knows how high inflation may go, and how long it will persist for.” This makes decisions about fiscal and monetary policy extremely difficult.
Early on Wednesday, the Resolution Foundation claimed that Brexit, which had made Britain a more closed economy, had compounded the cost-of-living damage for households and had negative long-term effects on productivity and wages.
In May, Britain had a higher headline inflation rate than the US, France, Germany, and Italy. Although Japan and Canada haven’t yet submitted their May consumer pricing reports, neither is probably going to come close.
Finance Minister Rishi Sunak stated following the statistics that the British government was making every effort to stem an increase in costs.
Food and non-alcoholic beverage prices increased by 8.7% annually in May, which was the highest increase since March 2009 and made this sector the main contributor to annual inflation in that month.
The ONS reported that overall consumer prices increased by 0.7 percent in monthly terms in May, slightly more than the 0.6 percent estimate.
The ONS reported that British factory-gate costs, a significant element in determining the prices that customers ultimately pay in stores, were 22.1 percent higher in May than they were a year earlier. This is the largest rise since these records began in 1985.