Inflation Rate Drops To 6.8% But Cost Of Food Rose in July

THE Office for National Statistics reported a drop in inflation to 6.8 per cent at 7am on Wednesday, August 16.

This brings some relief to the government as this aligns with their projected figures.

It suggests that Prime Minister Rishi Sunak might be on track to fulfil his commitment of reducing inflation to 5 per cent by the end of this year.

The Consumer Price Index (CPI), which measures inflation, indicates a decrease from June’s 7.9 per cent.

Core inflation, excluding food and fuel, remained steady at 6.9 per cent. While prices continue to rise, the pace of this increase has slowed.

Despite this anticipated decrease, the Labour Party is accusing the Conservative Party of overseeing a rise of over £350 in monthly expenses for the average household since 2021-22.

In response, Rishi Sunak expressed optimism on Tuesday, suggesting that there’s a positive outlook regarding the cost of living challenge.

However, the Labour Party contends that the government’s management has resulted in “13 years of economic turmoil and ineptitude.”

The Opposition argues that even with the deceleration in the inflation rate, families across the nation will still be spending £82 more per week on their living expenses compared to the 2021-22 period.

Global factors have contributed to the rise in prices.

For example, Ukraine is a large exporter of foods such as grain, and supply has been hit by the war.

Russia has also squeezed gas supply, impacting energy prices. Some argue Brexit has also played a major role, as the labour market has been tight – pushing up wages.

For obvious reasons, governments want to keep inflation low – the target is 2 per cent, and Rishi Sunak has pledged to get closer to that, 5 per cent, this year.

The Bank of England expects that to happen.

But just because inflation comes down, it doesn’t mean prices are. Anything over zero means prices are rising.

Louise Cooper, a senior lecturer in finance from Kingston University, said “How much damage will the Bank of England have to inflict to get inflation under control?”, indicating another rise in interest rates.

Food prices remain high

Food prices remain stubbornly high, with figures showing the cost of food has risen by 14.8 per cent.

Soaring food and non-alcoholic drink prices are putting intense pressure on household budgets.

Here are some of the main reasons food prices are rising so much.

Poor harvests

Food prices, especially for fruit, vegetables and sugar, have risen after poor harvests in Europe and North Africa reduced availability earlier this year.

Retailers and wholesalers have had to pay more for items such as tomatoes, peppers and salad, which have been in short supply.

Ukraine war

The National Farmer’s Union (NFU) president Minette Batters describes the war in Ukraine as a “game changer” for food supply chains.

Since Russia’s invasion in February last year, Europe has been forced to wean itself off Russian gas, increasing the cost of the vast amounts of energy needed to produce and transport food. This is then passed onto consumers at higher prices.

Brexit

Brexit has “made the situation worse for UK manufacturers”, according to the Food and Drink Federation, and been blamed for adding hundreds of pounds to the average UK household shopping bill.

The weak pound

Goods the UK cannot produce domestically have also been made more expensive to import by the pound’s weak performance in recent months.