The problem of the cost of living “hidden” by the fall in inflation
An economist has warned that the positive news of falling inflation is “hiding worse than expected news on living standards”.
On Wednesday, the Office for National Statistics (ONS) revealed the rate of Consumer price index (CPI) inflation fell to 10.5% in December from 10.7% previously. in November.
Economist Jack Leslie, of the Resolution Foundation think tank, argued that the numbers did not necessarily mean the cost of living crisis was easing, and he was particularly concerned about rising food prices and housing. ‘energy.
Food and drink inflation soared again to 16.8% in December from 16.4% in November, marking the highest level since September 1977.
Watch: The worst is not yet over for consumers – lower inflation is not the same as lower prices
Leslie tweeted: “The latest inflation stats from the ONS were released this morning and on the face of it there is good news: CPI inflation has fallen from 10.7% to 10.5 % (as expected).
“But I think that masks worse than expected news both on living standards and for the Bank of England.”
He added: “Food inflation in particular is worrying: it continues to rise (so far up to 16.9%).
“It is still true that inflation is much higher for basic necessities (food and heating).”
When the Resolution Foundation estimated average inflation rates across the entire income distribution, the poorest tenth still faced an inflation rate nearly 3% higher than the richest tenth.
As well as soaring food inflation, energy costs are also set to rise again in the spring when the government cuts its support package, capping gas and electricity bills at £3,000 a year from £2,500 £ currently.
It was also revealed the Hackney Foodbank had been forced to launch an emergency appeal for funding as it struggled to keep up with demand amid ‘the toughest time in living memory’.
The organisation, based in east London, said its food purchase costs are expected to reach £250,000 this year.
Trussell Trust network food banks distributed more than 2.1 million food parcels in 2021-22 for the first time outside of the first year of the pandemic.
This is a 14% increase over the same period last year and 832,000 packages went to children.
Meanwhile, the government has pledged to help halve inflation by the end of 2023 as it tries to tackle the cost of living crisis.
Chancellor Jeremy Hunt said: “While any fall in inflation is welcome, we have a plan to go further and halve inflation this year, reduce debt and grow the economy – but it is essential that we make the necessary difficult decisions and carry out the plan. .”
But Labor denounced the Conservative Party’s economic policies and said inflation was still five times the 2% target.