What does inflation mean to you?

What does inflation mean to you?

The UK inflation rate remained high at 9.9% in the 12 months to August, keeping it at its highest level in 40 years as the cost-of-living crisis continues to bite.

Despite a slight drop from July’s 10.1% in response to volatile fuel prices, the situation is likely to get worse before it gets better, with the Bank of England (BoE) predicting inflation to exceed 13% in the last quarter of this year. .

The current rise means that the price of everyday items such as basic food, fuel, clothing, shoes and furniture has risen in the last year, a development that threatens to hit low-income households hardest at a time when they can least afford to. pay.

Charities have already reported increased sales and demand for second-hand clothing in response to rising production costs, pushing street fashion to its most expensive levels since 1988, when records began.

“The decrease in the annual inflation rate in August 2022 mainly reflected a drop in fuel prices in the transport part of the index,” the Office of National Statistics (ONS) said on Sept.

“The smaller, partially offsetting, upward effects came from price increases in food and non-alcoholic beverages, miscellaneous goods and services, and apparel and footwear.”

Rising costs, staff shortages and supply chain disruption are known to affect both large retail brands and small businesses, leaving them with little choice, in their opinion, but to pass on price increases. consumers to ensure their own survival.

Meanwhile, ONS data revealed the extent to which UK wages have stagnated, with real wages falling 3% in value between April and June, a rise in cash terms overshadowed by rising costs elsewhere.

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Cost of living: how to get help

The cost of living crisis has hit every corner of the UK, pushing families to the limit as food and fuel prices soar.

  • The Independent asked experts to explain small ways to stretch your money, including managing debt and getting items for free.
  • If you need to access a food bank, find your municipality’s website using gov.uk and use your local authority’s website to locate the nearest centre. The Trussell Trust, which runs many food banks, has a similar tool.
  • Citizens Advice offers free help to people in need. The organization can help you find grants or benefits, or advise on rent, debt and budgeting.
  • If you are experiencing feelings of distress and isolation, or are struggling to cope, Samaritans offer support; you can speak to someone free of charge over the phone, confidentially, on 116 123 (UK and ROI), email [email protected], or visit the Samaritans website to find details of the nearest branch.

Private sector workers saw their wages rise 5.9% ahead of inflation – more than three times faster than their public sector counterparts, who received a 1.8% raise.

The figures put the new Liz Truss administration on track for fresh clashes with civil servants, including nurses, doctors, lawyers and teachers, who have seen their incomes plummet this year, adding to the pain of a decade of falling real wages.

“The scale of this wage pain is even deeper than official figures suggest, as wage growth estimates are still artificially boosted by the effects of last year’s furlough scheme,” said Nye Cominetti, senior economist at the Resolution Foundation.

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“This tightening came despite robust wage growth and a buoyant labor market, with wage agreements strengthening a bit and nearly a million people changing jobs in the last three months.”

Truss’s first move as prime minister to freeze Ofgem’s energy price cap, the maximum amount a utility can charge an average customer a year, of £2,500 for two years, will provide some relief to families. , who were facing another 80% increase. in its accounts as of October 1 in response to rising global gas prices.

If the regulator’s planned increase in the limit had been allowed, it would have risen from £1,971 to £3,549 for a household in average use, with those on prepayment meters charged even more.

The UK’s historic inflation rate

(PA charts)

The new prime minister also pledged to honor former Chancellor Rishi Sunak’s aid package for British families announced in February as part of an attempt to alleviate the “sting” of rising bills.

But after a summer of inaction, with the Conservative leadership contest to choose Boris Johnson’s successor dragging on interminably, while the incumbent preferred to take several holidays rather than rescue the electorate, the nation remains in a state of crisis.

British consumers face stagnant wages and higher costs for everything from food, clothing, petrol, heating, housing and rent at a time when rising interest rates mean the cost of borrowing is also rising, most recently rising another 0 .5 percentage point to 2.25%. while the BoE’s Monetary Policy Committee moved to try to curb inflation.

While the current outlook looks bleak, consumers are being encouraged to treat the current adversity, which will eventually pass, as an opportunity to reassess their personal circumstances, optimize their finances and cut any unnecessary regular expenses.

“The most important thing savers can do now is review how this environment will affect their finances, where they are holding their savings, and make the necessary adjustments,” said Colin Dyer, director of clients at Abrdn Financial Planning.

“For example, holding significant amounts of money in a deposit account is effectively losing money in an inflationary environment, so depending on your attitude towards risk, investing in stocks and ISA shares can provide a higher return if you invest for the long term. ”

Source : www.independent.co.uk

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