Prices are continuing to rise at their fastest rate for more than 40 years, driven by higher petrol and food costs.
UK inflation, the rate at which prices rise, jumped to 9.4% in the 12 months to June from 9.1% in May, the Office for National Statistics (ONS) said - with one leading economist now forecasting it to hit 12% by October before falling back sharply in 2023.
Petrol prices rose by 18.1p per litre in June, while costs for milk, cheese and eggs also climbed, the ONS said.
Research firm Kantar has predicted supermarket bills are set to rise by an average of £454 this year. This comes as energy bills, which rose by an unprecedented £700 a year in April for a typical household, are forecast to climb again in October.
Price rises 'becoming embedded'
There are growing signs of domestic inflation taking hold, while the price of services – which rely more heavily on local factors such as workers’ wages – are also rising uncomfortably quickly.
A hotel stay costs 14% more than it did a year ago. Similarly, restaurants and cafes charge 7.4% more than they did in June 2021.
A haircut will set you back 5.4% more than it did last year, and finding a mechanic is getting pricier, too. Servicing and maintaining vehicles costs 6.6% more now than a year ago.
Meanwhile, cinema and theatre ticket prices are up by more than one-sixth. A trip to a museum, library or zoo is likely to cost more than 5% more than it did in June 2021. Attending a sports match will cost 10% more.
What next?
Tom Pugh, an economist at RSM UK, said inflation rates made it more likely that the Bank of England will increase interest rates by half a percentage point next month, from 1.25% to 1.75%, in the sharpest increase since the mid-1990s.
However, he said yesterday's figures "wasn't all bad news".
He said: "Core inflation (which excludes energy, food and tobacco) dropped last month - which suggests that the huge pandemic-related increases in the price of some goods, such as used cars where inflation fell from 23% to 15%, are starting to unwind.
"More worrying was another rise in services inflation, which tends to be more domestically generated and stickier. This is the part that the MPC (Monetary Policy Committee) will probably focus on at the meeting in August.
"The big picture is inflation will hit 11% or 12% in October before falling back rapidly in the second half of 2023, and we expect it to be back at the 2% target in 2024."
FTSE 100
The UK's top share index, the FTSE 100, was down 10 points at 7,253 shortly after opening this morning, following yesterday's 31-point drop.
Companies reporting today
- SSE
- Intermediate Capital Group
- AJ Bell
- Brewin Dolphin Holdings
- DP Eurasia N.V. (DI)
- Dunelm Group
- Diploma
- Volution Group
- Mitchells & Butlers
- QinetiQ Group
- Workspace Group
- PensionBee Group
- Frasers Group
- Close Brothers Group