Liz Truss and Rushi Sunak during The Sun’s Showdown: The Fight for No10, the latest head-to-head debate for the Conservative Party leader candidates. The next prime minister will be forced to confront a historic cost of living crisis as food and energy prices soar and real income shrinks.
Dominic Lipinski | Pa Images | Getty Images
LONDON — U.K. inflation rose to another 40-year high in July as spiraling food and energy prices continued to intensify the country’s historic squeeze on households.
The consumer price index rose 10.1% annually, according to estimates published by the Office for National Statistics on Wednesday, above a Reuters consensus forecast of 9.8% and up from 9.4% in June.
This represented a 0.9% monthly climb, up from the 0.8% incline in June and ahead of a 0.6% forecast, but remaining well shy of the 2.5% month-on-month jump in April.
Rising food prices made the largest upward contribution to annual inflation rates between June and July, the ONS said in its report.
The ONS repeated that its indicative modelled consumer price inflation estimates “suggest that the CPI rate would last have been higher around 1982, where estimates range from nearly 11% in January down to approximately 6.5% in December.”
The Bank of England has implemented six consecutive hikes to interest rates as it looks to rein in inflation, and earlier this month launched its largest single increase since 1995 while projecting that the U.K. will enter its longest recession since the global financial crisis in the fourth quarter of the year.
The Bank expects inflation to top out at 13.3% in October. Conservative Party leadership candidates Liz Truss and Rishi Sunak, one of whom will succeed Boris Johnson as prime minister on September 5 after a poll of party members, are under increasing pressure to offer radical solutions to the country’s historic cost-of-living crisis.
The latest forecasts suggest the U.K.’s energy price cap could rise to £4,266 ($5,170) annually early next year from its current £1,971, with many households already choosing between heating and eating.
Real wages in the U.K. fell by an annual 3% in the second quarter of 2022, according to ONS data published Tuesday, the sharpest decline on record.
Despite average pay excluding bonuses increasing by 4.7%, the cost of living is far outpacing wage growth and squeezing household incomes.