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U.K. Inflation Hits 9% in April; Highest Since 1982

Economic Indicators May 18, 2022 07:34
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© Reuters.

By Geoffrey Smith

Investing.com -- Inflation in the U.K. leaped to 9% in April, its highest level since 1982, as a thumping rise in regulated household energy bills took effect.

The consumer price index rose 2.5% on the month, the biggest monthly increase since 1991, as the cap on household electricity and gas prices was adjusted to reflect the sharp rise in wholesale prices caused by Russia's invasion of Ukraine. That aggravated an already sharp imbalance between supply and demand. 

The regulator Ofgem estimates that annual bills for many households will rise by nearly 700 pounds ($870) a year as a result of the adjustment, even before a further rise in October come into effect.

In addition, a temporary cut in Value Added Tax (VAT) on many items, made during the pandemic, was also reversed. As a result, the VAT charged by sectors such as catering and accommodation has now returned to 20% from as low as 5% over the last two years.

Core inflation, which strips out volatile food and energy prices, also rose strongly, by 0.7%, as a reopening economy quickly ran into bottlenecks caused partly by supply chain problems stemming from the pandemic and partly by a skills shortage caused by the loss of European Union workers from the workforce.

There was also evidence of plenty more inflation in the pipeline, with producer input prices rising another 1.1% after a 4.6% rise in March, while factory gate prices rose 2.3% on the month, taking the annual increase to 14%.

Although big, the increases in most of the U.K. price indices weren't as bad as had been expected. As such, they had only a marginal immediate impact on the pound. By 3:40 AM ET (0740 GMT), sterling had even fallen back against the dollar to $1.2440, and had also lost 0.1% against the euro to $1.1888.

The pound has come under heavy pressure in recent days, not only from the inflation front but also from government plans to unilaterally change some of the terms of the agreement governing its exit from the European Union. EU officials have warned that it may suspend the whole agreement if the U.K. goes ahead, leading to the immediate imposition of tariffs on U.K. goods entering the single market and tighter restrictions on U.K. businesses - including the financial sector - selling services into the EU.

U.K. Inflation Hits 9% in April; Highest Since 1982
 

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Comments (8)
Paul Har
Paul Har May 18, 2022 15:35
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This inflation problem is happening around the world, so how can it be Brexit?
Arno Pfohl
Arno Pfohl May 18, 2022 12:28
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this is not demand side inflation driven. This media should stop misinforming the public. demand side inflation towards food and fuels is inelastic.
Arno Pfohl
Arno Pfohl May 18, 2022 12:28
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i.e demand in fuels and food remained the same.
John Williams
John Williams May 18, 2022 9:51
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BREXIT
david scott
david scott May 18, 2022 9:51
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eurozone inflation is currently 8.31%
David Hawley
David Hawley May 18, 2022 8:43
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As I have always said. The current inflation figures are not consumer driven, they are driven by factors outside the consumers control, so raising interest rates will not bring inflation down. They will only add to inflation.
Deepak Shetty
Deepak Shetty May 18, 2022 8:43
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money printing by central banks is the cause. It's going to hit everyone's pension savings unfortunately.
David James
David James May 18, 2022 8:43
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David your mortgage rate will be going up. Your repeated point is completely unfounded. Unemployment is at 3.7% and there is more vacancies than workers. This means wages are increasing because demand is too high and there is not enough workers which means second round effects are coming. Your grasp of economics is so poor. Low interest rates, money printing and low unemployment are sending inflation soaring. If they don't tighten now then inflation will just keep soaring higher.
Sankar Dutta
Sankar Dutta May 18, 2022 8:43
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just
Arno Pfohl
Arno Pfohl May 18, 2022 8:43
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David James rubbish..
David James
David James May 18, 2022 8:43
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explain how it it is rubbish? What a stupid comment with no content.
david scott
david scott May 18, 2022 8:38
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Inflation is always and everywhere a monetary phenomenon
Peter Tatlow
Peter Tatlow May 18, 2022 8:28
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At some point there always going to be a comeuppance for the monetary behaviour brought about to support Wall Street.
Ronak Thakrar
Ronak Thakrar May 18, 2022 8:19
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this is just the beginning....
Kochar Bipin
Kochar Bipin May 18, 2022 7:39
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Inflation at 9% is a no-brainer give the way energy prices have surged due to the Russia sanctions.
 
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