Inflationary pressures mount

Screenshot 2022-12-01 144005

Inflationary pressures mount

1st November 2021

Data released last month by the Office for National Statistics (ONS) revealed that the Consumer Prices Index (CPI) 12-month rate – which compares prices in the current month with the same period a year earlier – rose to 4.2% in October. This was above all predictions in a Reuters poll of economists and represents a considerable jump from September’s rate of 3.1%.

The rise was largely driven by higher household energy bills following the lifting of the regulatory price cap on 1 October, with gas prices paid by consumers up 28.1% and electricity up 18.8% in the year to October. ONS said price rises were evident across the board with the cost of petrol, second-hand cars, furniture and household goods, hotel stays and eating out all increasing noticeably.

Some of the current increase in the rate of inflation is inevitably due to weak price levels witnessed in October last year when the pandemic was dragging down economic activity. Analysts do expect to see inflation ease somewhat next year as these factors begin to drop out of the data.

Survey evidence, though, suggests there are further inflationary pressures in the pipeline. Preliminary data from November’s IHS Markit/CIPS Composite Purchasing Managers’ Index, for instance, revealed record cost pressures, with input price inflation ‘rising at the fastest rate since the index began in 1998’, fuelled by ‘higher wages and a spike in prices paid for fuel, energy and raw materials.’

November’s Monthly Industrial Trends Survey published by the Confederation of British Industry (CBI) also highlighted the current inflationary pressures; output price expectations among  manufacturers climbed to the highest level since May 1977.

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