UK Inflation hit the highest level since the 1980’s in October as food prices and fuel bills pile pressure on households.
Higher food prices and soaring energy bills were the main drivers of the higher inflation number with milk and cheese prices a major factor in taking food price inflation to 16.2%.
The manner in which inflation is running away and exceeding economist expectations will be a cause for concern. Economists had predicted October’s inflation would be 10.7% in October, after 10.1% in September.
The 11.1% number underlines the difficulties in forecasting, and therefore managing, inflation risks.
“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,” said Laura Suter, head of personal finance at AJ Bell.
Suter also highlighted the dramatic nature of price rises in October, and the fact energy prices have 90% jump in the last year.
“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,” Suter said.
Although UK inflation jumped to 11.1%, US inflation recently fell, suggesting this a localised problem and does not have global implications.
This was evident in fairly tepid market response – the FTSE 100 was down just 6 points at the time of writing.