UK inflation hits 30-year high of 5.5% as cost of living squeeze tightens – business live

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

UK inflation has hit a new 30-year high, intensifying the cost of living squeeze hitting households.

Consumer prices rose by 5.5% in the 12 months to January, data just released by the Office for National Statistics shows.

That’s the highest reading since March 1992 (when it stood at 7.1%), and up from 5.4% in December — even further above the Bank of England’s 2% inflation target.

The largest upward contributions to inflation over the last year was driven up by higher energy costs, and transport costs – due to pricier motor fuels and second-hand cars.

Clothing and footwear, housing and household services (including energy bills), and furniture and household goods prices all pushed up inflation in January, the ONS says.

The squeeze is set to escalate this spring, when the energy price cap is lifted by 54%, and national insurance contributions rise.

The Bank of England warned this month that consumer price inflation could peak at about 7.25% by April as surging energy prices feed through to consumers.

Yesterday, we learned that wages failed to keep up with inflation last year. Average basic pay (excluding bonuses), rose by 3.7% per year in the three months to December, behind rising prices.

However, figures from HM Revenue and Customs showed median wages rose by 6.3% in January compared with a year earlier – before taking account of inflation.

The agenda

• 7am GMT: UK consumer inflation report for January
• 7am GMT: UK producer price inflation report for January
• 9.30am GMT: UK house price index for December
• 10am GMT: Eurozone industrial production for December
• 1.30pm GMT: Canadian inflation report for January
• 1.30pm GMT: US retail sales report for January

Core inflation, which excludes energy, food, alcohol and tobacco, rose to 4.4% in January from 4.2% in December, its highest since records began in 1997.

Retail price inflation, a longer-running measure of rising prices, has surged to 7.8%, its highest level since March 1991.

RPI includes measures of housing costs. The ONS says RPI is no longer accurate, but it is still used to set some payments – such as the interest rate on student loans, and the interest payments for some government bonds.

It is also used in some pay settlements. The Unite union said last November that it will continue to base its claims on the RPI figure rather than CPI because “it better reflects the actual price rises experienced by Unite members”.

Pat McFadden MP, Labour’s Shadow Chief Secretary to the Treasury, says a windfall tax on oil giants’ soaring profits would help cushion the cost of living crisis:

“The cost of living crisis isn’t going away. With inflation expected to rise even further, and working people already feeling the crunch, the Tories should have taken action by now.

“Instead, the Chancellor’s buy now pay later scheme on energy bills loads up debt for future years, while his tax rises will only make matters worse.

“Labour’s plan would see cash to households in the short-term, funded by a one-off tax on oil and gas producer’s booming profits, alongside a longer-term strategy for warmer homes and greater energy security.”

Rachel Reeves, Labour’s shadow chancellor of the exchequer, tweets:

Furniture and household goods also drove up inflation.

Prices rose by 8.5% over the year, the highest since the inflation data series began in January 1989.

Average petrol prices were 145.1 pence per litre in January 2022, compared with 116.6 pence per litre a year earlier, this morning’s inflation report shows.

That means motorists paid nearly 25% more to fill their tanks last month, than a year ago.

It’s a slight drop in November and December’s record highs. But, fuel prices hit new record highs again this week, adding to the burden on UK household budgets.

Electricity prices rose by 19.2% over the last year, with gas prices surging 28.3%.

That’s due to the energy price cap increases in April 2021 and October 2021, and rising energy prices in Northern Ireland, which is not subject to Ofgem price cap.

It doesn’t yet account for the 54% price cap rise announced this month, which will start in April.

This chart shows how prices have been rising across the board, squeezing consumers:

On a monthly basis, CPI inflation fell by 0.1% in January 2022 — compared with a fall of 0.2% a year ago.

That’s because clothing prices only dipped by 2.9% last month– compared with a 4.8% fall a year earlier. It is the smallest monthly fall for clothing and footwear prices in the January sales since 1990.

ONS chief economist, Grant Fitzner, says there were fewer January sales than usual last month – which helped push inflation to a new 30-year high.

“Clothing and footwear pushed inflation up this month and although there were still the traditional price drops, it was the smallest January fall since 1990, with fewer sales than last year.”

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

UK inflation has hit a new 30-year high, intensifying the cost of living squeeze hitting households.

Consumer prices rose by 5.5% in the 12 months to January, data just released by the Office for National Statistics shows.

That’s the highest reading since March 1992 (when it stood at 7.1%), and up from 5.4% in December — even further above the Bank of England’s 2% inflation target.

The largest upward contributions to inflation over the last year was driven up by higher energy costs, and transport costs – due to pricier motor fuels and second-hand cars.

Clothing and footwear, housing and household services (including energy bills), and furniture and household goods prices all pushed up inflation in January, the ONS says.

The squeeze is set to escalate this spring, when the energy price cap is lifted by 54%, and national insurance contributions rise.

The Bank of England warned this month that consumer price inflation could peak at about 7.25% by April as surging energy prices feed through to consumers.

Yesterday, we learned that wages failed to keep up with inflation last year. Average basic pay (excluding bonuses), rose by 3.7% per year in the three months to December, behind rising prices.

However, figures from HM Revenue and Customs showed median wages rose by 6.3% in January compared with a year earlier – before taking account of inflation.

The agenda

• 7am GMT: UK consumer inflation report for January
• 7am GMT: UK producer price inflation report for January
• 9.30am GMT: UK house price index for December
• 10am GMT: Eurozone industrial production for December
• 1.30pm GMT: Canadian inflation report for January
• 1.30pm GMT: US retail sales report for January