What’s Going On Here?Data out on Wednesday showed that inflation in the UK is now the highest of all the G7 countries. What Does This Mean?The prices of goods and services in the UK climbed 9% last month versus the same time last year – well up on March’s 7%, and the fastest rise since 1982. Around 2% of that uptick was down to higher energy prices, but there were rapid rises across the board: food and drink was up around 7%, furniture and household equipment up 11%, and the cost of recreation and culture up 6% – the biggest increase since 2006. That means that the UK’s inflation rate is now higher than that of America, Germany, and the rest of the Group of Seven, and only just shy of a handful of other places. Why Should I Care?The bigger picture: Mo’ money, mo’ problems.
While the most recent US update suggested its inflation might’ve peaked, that doesn’t seem to be the case for Britain. Data out this week also showed that UK unemployment fell to its lowest in nearly 50 years last quarter, and that job vacancies outnumbered those looking for work for the first time on record. That’s got some economists worried that the country could slip into a so-called “wage price spiral”, in which companies raise prices even more as workers demand higher salaries.
Zooming out: This doesn’t seem fair.
Bloomberg Economics has worked out that inflation will add around £2,400 ($3,000) to the bills of the average UK household this year (tweet this). But analysis from the Institute for Fiscal Studies (IFS) has shown that the billionaires will be hit the hardest. Just kidding: it’ll be the poorest members of society impacted most, since they spend a higher proportion of their incomes on food and energy – both of which are most to blame for the rising prices. In fact, according to the IFS, inflation for the poorest 10% of households was actually 10.9% last month, compared to 7.9% for the richest 10%. | 