Recent data from the British Retail Consortium showed that shoppers have seen the highest price rises in nearly a decade after shop inflation almost doubled between December and January.
According to the BRC-NielsenQ price index, annual shop price inflation increased from 0.8% in December 2021 to 1.5% in January 2022, as prices reached the highest rate since October 2013. This sharp rise is said to have been driven by price increases on non-food items that are currently in high demand due to shortages, such as furniture and flooring.
More and more families are finding themselves in fuel poverty as they struggle with the cost of living crisis due to rising fuel prices, causing their energy bills to skyrocket. The latest official figures have put inflation at its highest rate for 30 years after having risen to 5.4% over the last year!
Non-food inflation rose to 0.9% from 0.2% over the last month, whilst food inflation rose to 2.7% in January, up from 2.4% in December.
Why is the Cost of Living Going Up?
Energy regulator Ofgem announced that the average domestic fuel prices will go up by £693 a year in April due to inflation. These increased costs have meant higher bills for many many businesses, who then typically pass on the extra cost to their customers through higher priced products.
Another reason for such high retailer prices is down to staff shortages as a result of Brexit and the pandemic, prompting many employers to raise their wages. However, raising wages can contribute to inflation. For example Greggs has increased the price of some foods in order to cover the higher labour costs.
What Else is Affecting the Cost of Living in 2022?
There are a number of factors that are currently contributing to the cost of living. These include:
- Regulated rail fares in England are set to rise by 3.8% in March
- TV and broadband price are also expected to increase at that time
- In April, companies, works and the self-employed will begin to pay an additional 1.25% in National Insurance contributions under the Health and Social Care Levy
- Rising Interest Rates will make mortgage payments higher for some homeowners
How Do We Measure Inflation?
Inflation is measured by the Office for National Statistics (ONS) which takes note of the price of thousands of everyday items, named ‘the basket of goods’. These are constantly changing and being updated, such as in 2021 when hand sanitiser and men’s loungewear were added, but sandwiches bought at work were removed.
Each month, the ONS releases its measure of inflation, showing how much these prices have risen since the same date last year. This is known as the Consumer Prices Index (CPI).
How Can We Tackle Inflation?
The Bank of England typically responds to rising inflation by raising interest rates. This means that anyone who has borrowed money could potentially see their monthly payments increase, especially if they are on mortgages tied to the Bank of England’s rates.
This is because, generally, when borrowing is more expensive, people have less money to spend and so will buy fewer things, allowing the prices to stabilise. However, when inflation is caused by external forces, such as the global squeeze on energy prices, a different response may be required.Instead, the government may cut taxes for consumers on items that are rising quickly, helping to reduce the impact of the increased energy prices.
For more of the latest financial advice and updates, check out our handy blog. Alternatively, if your business is struggling to cope with the cost of inflation, reach out to our team at Ryans today to discuss how we can help you.