UK inflation rises to 10.4%

March 28, 2023 by
Frank Calviño

UK consumer prices rose by 10.4% in February compared with a year ago. The inflation was more acute in food, hitting its highest level in more than 45 years. Official data showed Wednesday also highlights that the cost of visiting restaurants and hotels increased, something that could really harm the UK tourism industry.

Food prices soared 18.2% through the year to February, the sharpest rise since the late 1970s. The Office for National Statistics noted particular increases for some salad and vegetable items, partly caused by shortages, which led to rationing by supermarkets.

The surprise uptick in inflation in February follows months of deceleration since the pace of price rises reached a 41-year high of 11.1% in October.

The latest figures could make it more likely that the Bank of England will hike interest rates again when it meets Thursday.

Although recent turmoil in the banking sector is expected to weaken economic activity, as lending criteria are tightened, and so dampen inflation, “the Bank of England may well want to see hard evidence of that before it stops raising interest rates,” said Paul Dales, chief UK economist at Capital Economics.

Inflation is eating salaries in the UK

Perhaps one of the keenest examples that the current inflation in the UK is above the average for the nation is the recent deluge of protests and strikes hitting some of the major brands of the country. 

The common reason for these strikes is higher salaries. Something that Amazon is suffering directly and acutely. Amazon workers in the UK are planning further strike action as they dismissed as “an insult” a 50p an-hour increase to its minimum hourly pay for warehouse workers to £11.

The company said the pay rise announced on Wednesday, which will be implemented this weekend, meant minimum pay had risen by 10% in the past seven months, putting it ahead of the legal minimum wage for those aged 23 or over, which will be £10.42 an hour from April.

However, Amanda Gearing, a senior organizer for the GMB union, which has backed workers at Amazon’s Coventry warehouse in the first-ever strikes by its UK workers, said: “We’re listening to Amazon workers, and the message is unequivocal: this new pay rate is an insult.

Prices won’t go down in the short or mid-term 

The soaring cost of energy has been a key factor in driving inflation up, and the reasons behind the rise in the price of power won’t disappear in the short or mid-term. 

Oil and gas were in greater demand as life got back to normal after Covid. At the same time, the war in Ukraine meant less was available from Russia, putting further pressure on prices.

And due to the clear fact that the Ukraine crisis lingers on, it seems pretty self-evident that energy prices will keep rising throughout 2023 and pushing the inflation even further up.

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