UK inflation rose to a 30-year high last month, putting fresh pressure on chancellor Rishi Sunak to announce greater support for households when he delivers his Spring Statement on Wednesday.
The Office for National Statistics said the consumer price index rose at an annual rate of 6.2 per cent in February, up from 5.5 per cent in January and the highest rate since 1992. The monthly rise of 0.8 per cent between January and February was the fastest since 2009. Economists in a Reuters poll had predicted 5.9 per cent.
The recent surge has been driven by soaring global prices for energy, petrol, food and durable goods: the ONS said the biggest factors driving the February increase came from transport, furniture and household goods. Prices for clothing rose especially rapidly in February, but food inflation also picked up to an annual rate of 5.1 per cent
Yael Selfin, economist at KPMG, said the figures confirmed a “worsening squeeze on consumer incomes” that could force the chancellor to do more to shield those most affected, and add to pressure on the Bank of England to raise interest rates.
Kitty Ussher, chief economist at the Institute of Directors, said the data showed rising inflation was now “hard-wired into routine business decisions,” adding to uncertainties and leaving households reliant on benefits with their incomes lagging far behind prices.
February’s CPI reading is higher than analysts had expected but inflation is set to rise even more sharply in April, when regulated energy prices will jump. The Bank of England warned last week that CPI would rise above 8 per cent by June and could reach double digits towards the end of the year if Russia’s invasion of Ukraine kept global energy prices at elevated levels.
Jack Leslie, senior economist at the Resolution Foundation, said February’s figures were “a foretaste of the huge income squeeze coming”, which would be a “complete disaster for living standards”.
Sunak will promise to “stand by” families hit by rising living costs when he publishes economic forecasts alongside today’s Spring Statement, with measures likely to include a cut in fuel duty.
But he is unlikely to use all the headroom afforded him by a recent recovery in the public financesbecause the Treasury is nervous that higher inflation and interest rates will raise the cost of servicing government debt more than it will boost tax revenues in the coming year. About £500bn of debt payments are linked to the legacy RPI measure of inflation, which rose to 8.2 per cent in February.