Inflation reached 9.1% in May – industry reaction

22nd June 2022

Inflation edged up to 9.1 per cent in the 12 months to May, from nine per cent in April, according to data from the Office for National Statistics. The figure is now at the highest level since March 1982, when it also stood at 9.1 per cent.

The data suggests that inflationary pressures are still growing in the economy, with food and drink prices recording the single biggest contribution to prices in May,  at the same time, rising inflation is expected to push up grocery bills by £380 this year, according to new consumer data from Kantar.

Economists expected the high level to be maintained, with the peak still forecast to be ahead of us.

Commenting on the inflation figures for May, ONS Chief Economist Grant Fitzner said “Though still at historically high levels, the annual inflation rate was little changed in May.”

“Continued steep food price rises and record high petrol prices were offset by clothing costs rising by less than this time last year and a drop in often fluctuating computer games prices.:

“The price of goods leaving factories rose at their fastest rate in 45 years, driven by widespread food price rises, while the cost of raw materials leapt at their fastest rate on record.”

Richard Lane, Director of External Affairs at StepChange, said “The Government’s package of cost of living support measures will undoubtedly help many households to cope, albeit with difficulty. Yet for many people on low incomes and in debt, who have already pared back to the bare essentials, there’s still a shortfall between income and essential spending. Every hike in inflation widens the gap, and leaves people having to make ever more difficult choices in an impossible financial situation.”

“Among new clients turning to us for help, through the course of this year we’ve seen that on average they already have higher levels of arrears at the time they seek advice than they did last year. Helping lower-income households to stabilise their budgets and prevent a worsening debt spiral needs to be an ongoing urgent priority for Government as well as for firms.”

Joanna Elson CBE, Chief Executive of the Money Advice Trust, the charity that runs National Debtline and Business Debtline, said “With inflation now at 9.1 percent, rising costs are weighing heavily on household budgets.  For many people, the increasing burden of high prices is already taking its toll and is only adding to the difficulty of meeting day-to-day costs.”

“At National Debtline and Business Debtline we are hearing from more and more people with deficit budgets – where their income simply isn’t enough to cover their basic needs. Our worry is that options are running out for people who are already in financial difficulty.’ 

“The package of further support recently announced by the Government goes some way towards helping households under pressure.  For those on the lowest income, however, urgent action is needed, including significantly raising benefits.’

Federation of Small Businesses (FSB) National Chair Martin McTague said “The cost of living crisis starts with a cost of doing business crisis. Policymakers should act now to address rising consumer inflation at root, by taking pressure off the small firms that are doing all they can to absorb higher input, labour and energy costs, but can only absorb so much.”

 “A fifth of firms cite input costs as their main concern. Similar proportions say they are struggling to source the right goods and services or have experienced supply chain disruption. One in seven are struggling with labour shortages. One in ten are still not fully trading.”

 “On top of those worries are surging energy bills, travel disruption and the need to service debt, the cost of which is rising.”

 “As margins are eroded, leaving less and less for firms to invest in upskilling and innovation amid labour shortages and net zero targets, the Government must use the tools at its disposal to help stem the tide.”

 “That means looking at reversing hikes to national insurance contributions, reductions in business rates for small firms, cuts to VAT, especially on energy, and targeted reductions in fuel duty – many businesses, especially in rural areas, have no choice but to use the roads.”

 “On energy, policymakers should extend the help that’s been issued to households through the council tax system to micro businesses through the rates system. Unless action is taken now, surging costs will continue to be reflected in anaemic growth, productivity and investment figures.”

 “The small business community shrank in size to the tune of 400,000 over lockdowns. If surging costs keep on unaddressed, we’re set to lose hundreds of thousands more.”

Kitty Ussher, Chief Economist at the Institute of Directors, said “This is a story that has little changed since April, with the recent rise in household energy and transport prices explaining most of the high rate of inflation. The 0.1 percentage point increase in May is due primarily to the mathematical effect of having had a fall in food prices this time last year.”

“Although there will be some reassurance that the rate of increase has temporarily steadied following last month’s rise, we will have a long wait before it gets anywhere near back to the Bank of England’s 2% target. Our own surveys of IoD members show almost half of business leaders (46%) think inflation will still be above the Bank of England’s target two years from now.”

“Policymakers would be well advised to start talking publicly about when inflation might be expected to peak and start falling back, to help expectations re-anchor at a lower level.”