Saturday, June 25, 2022

Nine out of ten people are affected by rising cost of living when prices rise

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More than nine in ten people have seen their cost of living rise in the past month as food, fuel and energy prices continue to rise, pushing inflation to its highest level in four decades.

The number of people restricting their groceries has risen sharply, with 41 percent of people reducing the amount they buy, compared with 8 percent in September, a survey by the Office for National Statistics found.

Half of adults said they were worried about the sharp rise in energy bills, which have risen by £700 a year for the average home, after regulator Ofgem raised the level of its price cap last month. A further 40 per cent surge is expected this winter, taking bills to around £3,000.

A fifth of people said they were concerned about fuel costs, which have fallen dangerously close to £2 a liter this week.

Three-quarters of all adults said they were somewhat, or very, or somewhat concerned about the rising cost of living.

Respondents reported a variety of budget management tactics, with six in 10 people spending less on non-essential items and half saying they had reduced fuel or energy use. Just over a third (35 percent) said they shop more often to find better value for money.

Separate official figures showed that these concerns have started to affect shopping habits. Retail sales fell in May as consumers cut grocery spending, the ONS said.

Spending on groceries fell by 1.6 percent, sales in supermarkets by 1.5 percent and in specialist shops such as butchers and bakers by 2.2 percent.

The ONS also revised down sales growth in April, to a 0.4 percent increase from the previous estimate of 1.4 percent.

Nicholas Farr, an analyst at Capital Economics, said the decline shows consumer spending is “rather softening than declining.”

“The fall in retail sales in May suggests that the fall in real household incomes due to rising inflation is starting to hit consumer spending a little harder.”

However, he said the numbers are unlikely to stop the Bank of England raising interest rates further.

“In any case, we still expect interest rates to be raised from 1.25 percent now to 3 percent next year, which is above the consensus analyst consensus peak of 2 percent.”

Rishi Sunak on Wednesday claimed the government will do everything it can to fight a rise in prices as inflation hit a new 40-year high and rose 9.1 percent in the 12 months to May.

Economists fear that inflation, the rate at which prices are rising, will continue to rise in the coming months. The Bank of England estimates it could reach 11 percent this year.

“We are using all the instruments at our disposal to reduce inflation and combat rising prices,” said the Chancellor after the figures were announced.

“We can build a stronger economy through independent monetary policies, responsible fiscal policies that do not increase inflationary pressures, and by increasing our long-term productivity and growth.”

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