– Inflation hits 19-year high of 5.2pc on higher energy costs (Telegraph, Oct. 18, 2011):
The last time the consumer prices index (CPI) was higher was March 1992, when it reached 7.2pc, according to the Office for National Statistics (ONS) data.
Annual inflation was also 5.2pc in September 2008, when oil rocketed to an all-time high of $147 a barrel and the global financial system was on the brink of collapse following the failure of Lehman Brothers.
The ONS said that the price rises of four of the six large utility companies have been factored into the inflation figure so far. The other two will be reflected in the October inflation figures.
Bills for gas, electricity and other fuels rose 18.3pc on the year in September, while transport costs were up 12.8pc. Food prices were 6pc higher than last year. Economists had expected CPI to be between 4.9pc.
The unsavoury combination of high inflation and high unemployment in September pushed the UK ‘Misery Index’ to a 19-year according to Chris Williamson, chief economist at Markit.
A spokesman for the Treasury said: “The Government understands that these are difficult times for households, as price levels continue to be affected by high global oil and gas prices. The impact of rising energy prices in September was in line with previous forecasts by the Bank of England, who has also said that inflation should then fall rapidly in 2012.
The Government is taking action to help consumers with current high costs, including cutting fuel duty and freezing council tax, and the Prime Minister met yesterday with energy suppliers to discuss how to bring down customers’ energy bills.”
Today’s figures will prove costly for the Government as the September CPI reading is used to calculate next April’s rise in the basic state pension and other state benefits.
The retail price inflation (RPI), which includes more housing costs and is the benchmark for many wage deals, rose 5.6pc year-on-year, reaching its highest level since June 1991.
High inflation has led to the biggest real terms fall in average incomes in 35 years and the longest slump in family finances on record as wages fail to keep pace with rising prices, according to the Institute for Fiscal Studies.
Inflation is expected to start easing, though, and to slide back to 2pc by 2013 – taking some of the pressure off households.
“There is lots of light at the end of the tunnel, with global commodity prices having come down sharply in recent weeks, which should feed along the supply chain to consumers over the coming months,” said Andrew Goodwin, senior economic advisor to the Ernst & Young ITEM Club.
“With the VAT increase and the sharp rises in petrol prices also set to fall out of the inflation calculation in early 2012, we are confident that inflation will be back at the 2pc target by this time next year. This should ensure that spending power begins to increase again, providing some comfort for the hard-pressed consumer.”