PwC comments on Oct 2022 CPI figures

Commenting on the Office of National Statistics consumer price index October 2022: 

Commenting on the latest ONS inflation data, Jake Finney, economist at PwC, says:

“UK consumer price inflation was higher than expected in October as it increased to 11.1%, reaching its highest level since 1981.  Staggeringly, consumer prices jumped up by 2% in one month - which is equivalent to the Bank of England’s target for the rise in prices over the course of a whole year. Such a large month-on-month jump in consumer prices has only occurred twice in the last four decades.

“As expected, gas and electricity prices made the largest contribution to the headline inflation rate. Household energy bills increased by around one-quarter in October, with the government’s Energy Price Guarantee preventing a much larger rise of around three-quarters. Food price inflation also made a significant upward contribution as food prices jumped up by 16.5%, which is the highest annual increase in food prices ever recorded.

“Going forward, the outlook for inflation will depend primarily on the size and shape of the energy price guarantee. If the energy price guarantee comes to an end in March then we could see inflation reach a new peak in April as household energy bills potentially rise by an additional 50%.” 

Lisa Hooker, Industry Leader for Consumer Markets at PwC, said:

“There was no surprise that CPI exceeded last month’s already record high, given that October saw a further step up in  home energy bills. On top of that, as we predicted, food inflation continues to rise unabated - from 14.8% in September to 16.4% in October, a 45 year high - as supermarkets have been forced to pass on input cost price increases to already hard-pressed customers.

Worryingly, there have been particularly large increases in the price of food staples such as bread and pasta since September.

In fact there has been goods price inflation across almost all categories, which will mean less money in the pockets of consumers to spend on discretionary products and services in the critical run up to Christmas.

Retailers and hospitality operators had been hoping that this will be the first normal Christmas in three years after the impact of lockdowns in 2020 and the omicron variant in 2021.

It remains to be seen whether consumers rein back spending immediately, or are able to treat the coming months as a last hurrah before the impact of expected tax rises from the latest Spending Review.  

However consumers already told us that they do expect to spend more over Black Friday - by half a billion pounds compared with last year - according to our latest research which will launch later this week. The question is whether this momentum will last up till the end of the year.”