Credit, Collections & Insolvency News
The cost of living surged by 4.2% in October, the highest rate in almost 10 years, due to rising fuel and energy costs, according to ONS data.
Commenting on the figures, Shachar Bialick, CEO and founder of Curve, a financial super-app, said “If Andrew Bailey is uneasy about rising inflation then Brits have every right to feel worried. Inflation is already rising and with UK inflation expected to hit 5% next Spring, well above the 2% government target, household income will be hit hard. US inflation is also at its highest level for more than 30 years at 6.2%. The vast majority of the world is pegged to USD, meaning the impact of high US inflation will be felt globally. We can’t disregard the impact inflationary pressure in the US will have on the entire world, including in the UK economy and our own personal finances.”
“Personal income suffered for many during the pandemic with widespread job losses, furlough and business closures. We may be nearing the end but we’re still in a crucial recovery phase. Supply shortages, gas price rises and rent increases are just some of the factors squeezing household income. An interest rate rise is also on the horizon which will benefit savers, but anyone with a mortgage or loan could see their payments go up.
“Brits need a flexible approach to their finances. The ability to move payments from one card to another, make the most of benefits and cashback on offer, and free up money from past transactions. This will help people to meet current and future financial requirements, helping to ease some of the financial strain caused by rising inflation.”
Alastair Douglas, CEO at TotallyMoney aid “The surge in the price of food, drink and fuel comes at a time when people are already struggling. The Covid crisis is still not behind us, and is now evolving into a cost of living crisis. It’s incredibly worrying as we head into the winter months.”
“The £500m in government support announced in September will help the most vulnerable households across the country, but the challenge lies in reaching those who don’t necessarily ‘tick the box’ to qualify. Millions more have been financially squeezed by the pandemic, and for them creeping living costs are impacting their ability to make ends meet.”
“In the coming months, an interest rate rise will add to that pressure. That makes it even more important that they are able to plan ahead, prioritise and make informed decisions about their finances.”
Thomas Pugh, Economist at RSM UK, said “The jump in inflation in October to its highest rate since 2011 was largely driven by the recent rise in energy prices. Inflation will probably stay around 4% until April when it will take another leap up to almost 5%. But inflation will fall just as quickly over the rest of 2022 as base effects fall out of the annual comparison. This is one reason why we think that interest rates will be closer to 0.5% by the end of next year than the 1% the financial markets have priced in.”
“The rise in inflation from 3.1% in September to 4.2% in October was almost entirely driven by the 22.9% rise in electricity and gas inflation. Admittedly, inflation continued to rise across the board, especially transport (8.4% vs 9.9%) and restaurants and hotels (5.1% vs 6.3%). But the largest price pressures are being felt in those areas most affected by supply chain disruptions. Used car inflation is a whopping 22.8% and goods inflation as a whole was 4.9% in October. But services inflation was 3.2% and core inflation, which excludes energy, food, alcohol and tobacco, was 3.4%.”
“With inflation almost double the MPCs target of 2.0% and no signs that the ending of the furlough scheme in September adversely affected the labour market, the stage seems set for the MPC to hike interest rates in December. However, inflation will fall quickly after its peak in April as some of the recent jumps in energy and car prices fall out of the annual comparison. CPI inflation should be back around 2% by early 2023.”