The ONS’s latest data release showed that the consumer price index (CPI) inflation rate rose to a 40 year high of 9.1% in May.
Barret Kupelian, senior economist at PwC, said:
“A closer look at the figures shows that the composition of inflation is changing. Some of the product categories that were driving up the headline rate over the past few months are beginning to moderate in price. For example, used car inflation has now started to moderate from 31% in February to around 23% in May. Some of this can be explained by supply chains being in a better state than they were a year ago.
“Inflation from essentials, including food and fuel, now contribute to around half of the headline rate. Food price inflation is now running at 8.5% and the depreciation of sterling by 4% to 5% in the month of May continued to push up retail fuel prices. Inflation on essential items has the same effect on households as a tax hike, as it is difficult for people to reduce their consumption of these items.
“Later in the year we expect further headwinds on the energy front, and our analysis suggests a 40% increase in the energy price cap in October. Furthermore, increases in food prices in the UK tend to lag behind international prices, so we expect food inflation to hit double digits later in the year. Although the summer break will offer some respite for most families, more price increases will head their way in the autumn."
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