Concern for UK Households Rises as Inflation Soars

Main points

• Headline consumer price inflation increased to 11.1 per cent in October 2022 from 10.1 per cent in September. At the same time, NIESR’s measure of underlying inflation which excludes 5 per cent of the highest and lowest price changes, rose to a new series high of 8.8 per cent from 8.3 per cent in September. The latter measure of inflation suggests that inflation continues to be more persistent and broad-based.
• Between September and October, the housing, water, electricity and gas, and other fuels as well as the food and non-alcoholic beverages sectors were the main drivers of higher headline inflation: these sectors contributed 0.93 and 0.18 percentage points, respectively, to the change in the headline figure, outweighing the effects of a 0.23 percentage point reduction in transport.
• Our analysis suggests that in October, approximately 30.6 per cent of goods and services prices changed with almost 19,000 items recording price increases.
• Underlying inflation increased in each of the 12 UK regions in September. Underlying inflation in the North of England was the highest at 9.5 per cent, while the South East had the lowest rate at 8.4 per cent in October.
• NIESR expects annual CPI inflation to remain around 11 per cent into the first quarter of 2023, mainly driven by the ‘triple shock’ to energy, food, and housing prices. Given this triple shock, we forecast that one in five UK households will see their savings eroded by April 2024. In the shorter term, our research suggests that more than 2.5 million households will turn to food banks to cope with soaring prices over the coming winter months.

 “Annual CPI inflation increased to 11.1 per cent in October from 10.1 per cent in September. This contribution to the headline figure was almost entirely driven by energy, which saw high price increases despite the government’s Energy Price Guarantee. Food prices have also seen a steep increase - this is particularly worrying as there is no support for households to deal with this surging cost. Our measure of underlying inflation increased to a new series high of 8.8 per cent in October from 8.3 per cent in September, suggesting that inflation continues to be more persistent and broad-based. We expect annual CPI inflation to remain around 11 per cent into the first quarter of 2023.”

Paula Bejarano Carbo
Associate Economist, NIESR

See our previous tracker to follow the analysis