The inflation figures released on Wednesday 17 August 2022 by the Office for National Statistics (ONS) reported that the Consumer Prices Index (CPI) rose by 10.1% in the 12 months to July 2022, the highest rate since February 1982 and up from 9.4% in June. Core inflation – which strips out food, energy, alcohol and tobacco – stood at 6.2% last month in the year to July, up from 5.8% in the year to June.

The main driver behind the rise in inflation was higher food prices, which rose at an annual rate of 12.7% in July, up from 9.8% in June. The largest upward contributions (of 0.04 percentage points) came from bread and cereals, and from milk, cheese and eggs – where prices for milk, cheddar cheese and yoghurts increased notably. Other smaller effects (of 0.03 percentage points) came from meat, vegetables, and sugar, jam, syrups, chocolate and confectionery. Food prices rose 2.3% between June and July, the biggest monthly increase since May 2001.

Restaurant and hotel prices rose by 9% in the year to July, the highest rate ever recorded, while fast food takeaway and pub meals also became dearer. Prices for clothing and footwear fell by less than last year, as retailers discounted less in the summer sales, in particular for women’s clothes and shoes and infants’ clothes, while menswear prices fell by more than a year ago. Fuel prices, air fares and international rail tickets went up in price between June and July, with fuel prices up by 43.7% in the year to July, the highest rate recorded.

On a monthly basis, CPI also rose by 0.6% in July 2022, compared with no change in July 2021. Rising food prices made the largest upward contribution to the change in CPI annual inflation rate between June and July 2022.

Evidence provided by the producer price index highlights a ‘cost of doing business crisis’ as firms’ costs continue to surge. Producer output (factory gate) prices rose by 17.1% in the year to July 2022, the highest rate since August 1977 and up from 16.4% in the year to June. Producer input prices rose by 22.6% in the year to July.

Responding to the UK inflation figures for July 2022, Suren Thiru, Economics Director for ICAEW, said: “Red-hot inflation is suffocating the UK economy, and with the peak some way off, the risk of recession is rising. The latest increase means that the cost-of-living crisis is escalating as inflation continues to outstrip pay growth, eroding people’s incomes. Companies’ ability to operate is also under significant pressure as they see their own costs surge and customer demand wilt. 

“Inflation may moderate a little in August as strong base effects caused by the comparison with August 2021, when inflation leaped from 2.0% to 3.2%, impacts the calculation. However, with eye-watering increases in energy bills due from October, inflation is on track to peak at more than 13%.

“With inflation soaring, another half-point interest rate rise in September is very much on the table. However, with the looming recession likely to help bring down inflation, the case for continuing to tighten monetary policy should diminish.”

For further information, visit: ONS Consumer Price Inflation UK July 2022