The cost of living rose as fast as in almost ten years, hitting 4.2% in October through October. This is mainly due to higher fuel and energy prices, but the National Bureau of Statistics said that prices for used cars and outdoor food are also rising.
Inflation has risen sharply after Covid restrictions ended this year and the economy reopened. The Bank of England said it might have to raise rates to cope with soaring prices in the coming months. The indicator for October was well above year-to-September growth of 3.1% and more than double the bank’s target of 2%.
This also applies to services like nail art or cleaning your car. You may not see a low rate of inflation from month to month, but in the long run, those price increases can have a significant impact on how much money you can buy – sometimes called the cost of living.
Which item is more expensive?
Household energy bills are the biggest driver of inflation after Ofgem, the energy regulator, raised gas and electricity price limits last month. This means that gas bills rose by 28.1% and electricity bills by 18.8% in October.
Gasoline prices also rose 25.4p to 138.6p per liter amid a surge in world oil prices. Used car prices have also risen 27.4% since April this year as microchips have become scarce worldwide, which has slowed the production of new vehicles.
Hotel stays, transportation, clothing, household appliances, and raw materials have also become more expensive.
Why did the price go up?
There are some reasons:
- Demand for oil and gas causes energy prices to rise worldwide. This means higher bills for households and businesses, many of which pass some or all additional energy costs on to their customers.
- The scarcity of many goods, including building materials and computer chips, is causing supply problems and driving up prices.
- Government support for businesses during the pandemic – such as VAT reduction on the hospitality industry – is over.
- Businesses struggle to hire truck drivers and hospitality workers, so they need to raise wages (costs passed on to consumers). According to the OECD International Political Forum, this is partly due to the pandemic but will also be complicated by Brexit.