Inflation at highest level in nearly 30 years
The last time CPI 12-month inflation was higher was in March 1992, when it stood at 7.1%.
In December 2021, the CPI rose by 0.5% from the previous month, compared with a rise of 0.3% in the same month the previous year.
The Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 4.8% in the 12 months to December 2021, up from 4.6% in the 12 months to November.
The largest upward contributions to the December 2021 CPIH 12-month inflation rate came from housing and household services (1.31 percentage points) and transport (1.29 percentage points, principally from motor fuels and second-hand cars).
The largest upward contributions to the change in the CPIH 12-month inflation rate between November and December 2021 came from food and non-alcoholic beverages, restaurants and hotels, furniture and household goods, and clothing and footwear.
The latest figures come a day after ONS data showed wage rises for UK workers are already being wiped out by the surging cost of living, even before the latest uptick.
Martin Lawrence, director of investments at Wesleyan, said: “Currently, inflation is like a bad cold – it will get worse before it gets better. Bills for UK businesses and consumers keep going up and the driving forces behind inflation – such as ongoing supply chain shortages and high oil prices – don’t seem to be easing. Though the Bank of England expects inflation to peak at 6% by spring and then fall closer to its 2% target, at this stage it appears to be an optimistic view.
“The Bank of England nudged up its interest rate last December, to help combat inflation, and is likely to act again in February. However, most people won’t have noticed a positive impact on their finances, especially with UK wage growth slowing and rising energy and food prices, which are bitter pills to swallow.”
Colin Dyer, client director at abrdn Financial Planning, said: “With costs soaring for food, fuel and energy, as well as the uncertainty that the Omicron variant brought, it is no surprise that we are continuing to see inflation grow. And although this is the kind of inflation that is felt by almost everyone, clearly those on low or fixed incomes, such as retirees, face the toughest struggle.
“The Bank of England raising the base rate to 0.25% last month might seem like good news at face value, but it is still just a fraction of where inflation sits. That’s why those relying on their savings need to do what they can to outpace inflation – including considering investing rather than holding excess money in cash – or risk their hard-earned money being eroded over time.”