| 11.6°C Belfast

Record rise in inflation rate with warnings of worse to come

Close

(Dominic Lipinski/PA)

(Dominic Lipinski/PA)

Brian Reid, chief executive of Warrenpoint-headquartered Deli Lites

Brian Reid, chief executive of Warrenpoint-headquartered Deli Lites

/

(Dominic Lipinski/PA)

A record breaking inflation rate rise is largely due to the end of the six month energy price cap in Great Britain, but Northern Ireland is not cushioned from the shock, economists say.

And one leading figure in the food industry here warned further increases could make the rest of the year “one like no other” in recent memory.

The cost of living across the UK rose to 9% in the year to the end of April, up two points from the previous month, the fastest increase on record, the Office of National Statistics (ONS) reported today.

It was the fastest measured Consumer Prices Index (CPI) rate rise since records began in 1989, and the ONS estimates it was the biggest jump since 1982. The annual inflation rate is the highest in four decades, the ONS said.

Six month price caps on energy prices ended on April 1 in GB, where the average household bill immediately rose by 54%. The huge price increases here were staggered over several months.

Brian Reid, chief executive of Warrenpoint-headquartered Deli Lites, one of Ireland’s top sandwich companies, warned there is worse to come.

Weekly Business Digest

Margaret Canning’s selection of the must-read business stories straight to your inbox every Tuesday morning

This field is required

“It will get worse, with a lack of people, (Brexit) and challenging food supply chain as a result of Ukraine,” Mr Reid said.

“The energy price increases in the winter could make this a year like no other.”

In GB, energy prices will be capped until October 1, then lifted.

Grant Fitzner, chief economist at the ONS, said: "Inflation rose steeply in April, driven by the sharp climb in electricity and gas prices as the higher price cap came into effect.

"Around three-quarters of the increase in the annual rate this month came from utility bills.

“We have also published new modelled historical estimates today which show that CPI annual inflation was last higher 40 years ago."

Mark Magill, senior economist at Ulster University’s Economic Policy Centre, noted the 12 month inflation rate for gas is 95.5% and 53.5% for electricity.

“Northern Ireland is not subject to the same price cap as GB. However because energy price inflation is being driven by global factors (NI) is not cushioned but does avoid experiencing price rises in the same manner as GB,” Mr Magill said.

”Although energy prices have been the key driver, core inflation, which excludes volatile components such as energy and food, at 6.2% is also rising rapidly, highlighting widespread price increases across a basket of goods and services.

“High inflation affects everyone in society.

“However, those on low incomes face a higher personal inflation rate with higher energy and food accounting for a higher proportion of their expenditure.

“Those on lower income tend to be more likely to be on fixed incomes linked to benefits, demonstrating the significant potential for hardship without government intervention.”

The Institute for Fiscal Studies, an economic think tank, suggested the poorest households might be facing inflation of 10.9%. This is higher than average because they spend a larger portion of their money on heating and lighting their homes.

Richard Ramsey, chief economist with the Ulster Bank, said expectations are for CPI to exceed 10% later this year. He noted on Twitter that unemployment is at a 48-year low but inflation is at a 40 year high

High energy prices have pushed up the prices of many other items, including food. The war in Ukraine has also hit global food supplies.

Restaurant prices, for example, rose 1.8% in just a month.

Chancellor Rishi Sunak said inflation is hitting countries around the world, and pointed to energy prices as a main culprit.

"We cannot protect people completely from these global challenges but are providing significant support where we can, and stand ready to take further action," he said.

The Joseph Rowntree Foundation said that parents were skipping meals to ensure their children could eat and others were cutting back on showers to save water.

"Inflation has hit a 40-year high. Yet last month, with prices already climbing, the Chancellor chose not to uprate benefits in line with inflation, leaving the basic rate of benefits at its lowest for 35 years," said Rebecca McDonald, the foundation's senior economist.



Privacy