Inflation in Britain at Fastest Pace in 40 Years

“That is a major worry, and not just for this country, but for the developing world as well,” he said. “Sorry for being apocalyptic for a moment, but that is a major concern.”

While the sharp rise in April’s inflation rate in Britain was expected, the pain of such fast and increasingly widespread price increases will be felt across households as inflation outstrips wage growth.

Pay excluding bonuses rose 4.2 percent from January through March, compared with the same period a year ago, data published on Tuesday showed. High bonus payments kept total pay rates above inflation but these bonuses were limited to certain sectors, and were especially strong in finance and business services.

For now, a tight labor market is adding to the inflationary pressures because it encourages companies to pay employees more — though not enough to keep up with food and energy price increases. The unemployment rate declined to 3.7 percent in March, the statistics office said on Tuesday, and for the first time in records going back to 2001, there are fewer unemployed people than job vacancies.

Pressure on the government to support people on low incomes trying to cope with the rising cost of living has intensified. Prime Minister Boris Johnson said last week that there would be more support announced in the coming months, as the Treasury’s resistance to additional measures appears to be softening.

Inflation is unlikely to have peaked. Economists expect another steep increase in the energy price cap when it is reset again in October and reflects the rise in energy prices since Russia invaded Ukraine. The Bank of England predicts that Britain’s inflation rate will peak above 10 percent in the last quarter of the year.

Article source: https://www.nytimes.com/2022/05/18/business/uk-inflation-economy.html