The consumer price index rose to 5.4 percent in December from a year earlier, adding to concerns about painful months ahead for household budgets.
Prices in Britain rose at their fastest pace in 30 years in December, according to the national statistics agency, stoking concerns about the strain on household budgets with inflation still months away from its expected peak.
The annual rate of inflation was 5.4 percent, up from 5.1 percent in November. That’s the highest since March 1992, the Office for National Statistics said on Wednesday, based on data modeling for the period before official records were collected.
Since the pandemic disrupted supply chains and labor markets as economies unevenly shut down and reopened, many countries are facing higher-than-expected inflation rates that are lasting longer than policymakers anticipated. In the United States, the inflation rate rose to 7 percent in December, its highest level in 40 years. In the eurozone, the annual rate increased to 5 percent last month, and it hasn’t been higher in the history of the common currency, which was established in 1999.
The Bank of England increased interest rates in December with inflation running substantially above its 2 percent target and not expected to peak until April, when households are estimated to face a more than 50 percent increase in their energy bills. Most analysts expect the bank to raise rates two or three more times this year, and the next increase could be as soon as the next rate-setting meeting on Feb. 3.
The data on Wednesday showed that the biggest contributors to the increase in the inflation rate in December were prices for food, which had the biggest monthly rise in a decade; furniture and household goods; and charges at restaurants and hotels.
Inflation is already outstripping wage growth in Britain, a separate report from the statistics agency showed on Tuesday, so the combination of higher food prices, rising energy bills and tax increases coming in the spring is raising concerns about a squeeze on household budgets. For this year and next, the central bank has projected, income from wages and general government benefits, after taxes and inflation are subtracted, will be less than the year before.This would be the third period that wage growth had run below inflation in a decade.
Companies are passing highercosts from materials, shipping and wages on to their customers. A large retailer, Next, said this month that prices for its spring and summer clothing would rise 3.7 percent from a year earlier, and that then there would be a 6 percent increase for fall and winter goods.
“There is no doubt that prices are being boosted by factors that should moderate in time, including surging energy costs and supply chain problems,” Ambrose Crofton, a strategist at J.P. Morgan Asset Management, wrote in a note to clients. “But in the near term, consumers are still going to feel the pinch as price increases may get worse before they get better.”