The consumer prices index has risen to 10.4% in the year to February 2023, up from 10.1% last month, despite widespread speculation that the figure would fall into single digits.
Fresh data from the Office for National Statistics showed all three measures of inflation increased on the previous month, with the largest upward contributions coming from rises in the cost of energy, food and non-alcoholic drinks.
The consumer prices index including owner-occupiers’ housing costs (CPIH) rose by 9.2% in the 12 months to February 2023, up from 8.8% in January. Meanwhile the retail prices index, the measure most frequently cited by trade unions in pay negotiations, stood at 13.8% in the year to February, up from 13.4% in January.
CPIH inflation in the 12 months to February 2023 saw marked increases in the cost of food and drink (18.2%), restaurants and hotels (12.1%) and housing and household services (11.8%).
The ONS said the largest upward effect came from vegetables, which followed reports of shortages of salad produce and other vegetables, reportedly because of bad weather in southern Europe and Africa, and the impact of higher electricity prices on produce grown out of season in greenhouses in the UK and northern Europe.
The rising cost of living comes as XpertHR predicted that average pay settlements are expected to decline to around 5% later in the year, falling from their current 6% peak.
Dr George Dibb, head of the Centre for Economic Justice at think tank IPPR, said the “surprise increase” would add to households’ financial concerns.
“With some of the biggest contributions to rising prices coming from essentials like food, drinks and clothing most households will find that their pay packet doesn’t stretch as far,” he said.
“From an economics perspective, all eyes now turn to tomorrow’s announcement from the Bank of England’s interest rate setters. Rising ‘core’ inflation will raise concerns amongst central bankers that inflation is increasingly embedded. However, it’s important to note that all the major forecasters are expecting a significant drop in inflation – even deflation – later in the year.”
TUC general secretary Paul Nowak said: “Families are still under massive pressure from the rising cost of living, with food prices rising especially fast. But they got next to no help from last week’s Budget.
“We need a comprehensive plan to get wages rising across the economy, and to boost social security. That’s how we build an economy that rewards work not wealth.”
James Smith, research director at the Resolution Foundation, said: “The surprise inflation rise last month will further complicate the decision facing [Monetary Policy Committee] members over what to do about interest rates, as they grapple with turmoil in the banking sector.
“Hospitality and food costs continue to drive up inflation. The latter means lower-income families are facing the greatest price pressures of all, with an effective inflation rate above 12%.
“Significant falls in inflation are still on the cards in the coming months, with household energy costs set to start falling from July, and signs that pay growth has stalled.”
The Bank of England’s Monetary Policy Committee will make a decision on UK interest rates on Thursday (23 March 2023).
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