War in Ukraine and lockdowns in China lead to UK’s fastest price rises in years | Inflation

The cost of household items such as toys, furniture and clothes is rising at the fastest rate in more than 15 years, as the impact of war in Ukraine combines with Covid lockdowns in China.

Non-food inflation accelerated to 2.2% in April from 1.5% in March, according to the latest store price index from the British Retail Consortium (BRC) and market research group NielsenIQ, the highest rate since the monitor was launched in 2006.

Food inflation hit 3.5% in April – from 3.3% in March – making it the highest figure in the index since March 2013, as the price of energy and raw materials, including wheat and oil, has pushed up costs for many producers.

Inflation is intensifying existing pressures on the cost of living, including last month’s energy cap increase which pushed up the average electricity and gas bill by £700 a year. Petrol prices have also soared, while household budgets are already under pressure after Chancellor Rishi Sunak increased National Insurance contributions.

Helen Dickinson, chief executive of the BRC, which represents most major UK retailers, said furniture, electrical goods and books were seeing particularly steep price increases as the disruption caused by the UK’s invasion of Ukraine Russia adding to higher energy prices.

It is understood that flooring, stationery and DIY materials including paint, which are all heavily imported from China where many major cities have been closed under strict anti-Covid measures, are also experiencing high cost increases.

“This [inflation] has been exacerbated by disruptions at the world’s largest seaport, following Shanghai’s recent lockdown,” Dickinson said. “Food prices continued to rise, although fresh food inflation slowed as fierce competition among supermarkets weathered price hikes for many basic necessities.”

The BRC’s comments follow a warning from non-food retailers that sales have been hit by supply difficulties and weakening demand. The greatest pressure on living standards since the 1950s has made consumers more gloomy about their finances and much less willing to spend in stores.

Sainsbury’s, owner of the Argos chain, has reported problems with items such as televisions and consumer electronics made in China. The retailer said it expected supply chain difficulties in East Asia – and a squeeze on customers’ available cash caused by rising energy bills, d fuel and food – lead to lower sales of these items.

Shares of home appliance specialist AO World fell by more than a fifth last week as it said consumer demand for electrical appliances had “gradually weakened”.

According to the latest data from market research firm Kantar, households are reducing their spending on wholesale non-essential items as the average household faces a potential rise in grocery prices of £271 a year. He said shoppers had started stockpiling some produce, such as sunflower oil, amid concerns about rising prices and potential shortages.

Meanwhile, the rising cost of living is expected to lead to a sharp increase in personal borrowing.

UK household demand for credit is set to hit a five-year high of 7.9% – around £16bn – in 2022, according to the latest bank lending forecast from EY Item Club UK, as consumers are increasingly turning to credit cards to cover their bills. .

The rise would mark a reversal of trends since the first phase of the pandemic, when many people paid off their personal debts with almost £200bn in extra cash saved up – mostly by wealthier households – due to restrictions on travelling, socializing and visiting street shops.

Sign up for First Edition, our free daily newsletter – every weekday morning at 7am BST

However, EY predicted demand for unsecured loans would decline as households are likely to cut back on spending on discretionary purchases and big-ticket items, such as sofas and appliances, to save money for home. ‘essential.

Mortgage growth is also expected to fall from 4.3% last year to 3.8% this year and 3.3% next year – to £59.4bn and £53.5bn sterling in 2022 and 2023 – amid rising interest rates and growing cost of living pressures.

Leave a Comment