The rise in energy bills in October has pushed inflation to a new high, with CPI hitting 11.1% in October, taking it to the highest rate for more than 40 years.
This is broadly in line with the Bank of England’s latest expectations, but as recently as February the Bank was expecting a peak of around 7% this year – showing just how fast the environment is changing.
Laura Suter, head of personal finance at AJ Bell, comments on the latest inflation figures: “Buried in the details of the data are some alarming facts. In the past month alone we saw the same increase in prices that we did in the entire year to July last year. On top of that, energy costs have risen by almost 90% in the past year, with gas prices more than double what they were a year earlier. That clearly is unsustainable for families.
“The Government’s Energy Price Guarantee had been heralded as a way to keep inflation down, but the ONS figures show that it didn’t have the huge limiting effect that many claimed. It projects that inflation would have hit 11.8% in October had the cap on energy costs not been introduced.
“It’s not just energy costs rising, food prices have shot up again, seeing the highest inflation for this category in more than 45 years. Anyone who has done their weekly shop will feel this keenly, and while many are trading down and ditching the brand names, others are simply having to go without.
“Falling petrol prices and a drop in the cost of second-hand cars were the only big pressures trying to push inflation down. Fuel prices have dropped back from their high – but they are still more than 20% higher than this time last year. The fact that the cost of a second-hand car has dropped back below the cost last October will be of little comfort for those struggling to pay energy bills or for their food shop.
“While the headline figure of 11.1% is useful to have, in reality everyone’s personal inflation figures will be different. If you spend more of your income on food and energy bills, and aren’t benefitting from lower petrol and car prices, your headline figure will be far higher. This is why many people feel like they are struggling with a rise in costs far higher than 11%.
“The ONS estimates that the lowest income households are actually seeing inflation of 12.5%, while the wealthiest people are seeing lower inflation of just 9.6%. Those in social housing are facing some of the highest costs, while private renters are experiencing lower price rises.”