Cost Of Living Squeeze Tightens As Inflation Hits Highest Level In Three Decades

27th January 2022

Inflation reached its highest level in 30 years, and Britain's cost of living squeeze is likely to continue to tighten until next Spring when energy bills jump, the Resolution Foundation said in response to the latest ONS prices data.

Inflation hit 4.8 per cent (CPIH) / 5.4 per cent (CPI) in December, with the latest rise driven by a broad range of factors from fossil fuels to clothing and food.

Inflation is being by the rising cost of goods (6.9 per cent) rather than services (up to 3.1 per cent). While volatile, a fall in output price inflation for goods in December - generally a leading indicator of broader inflation – offers some hope that inflationary pressures could start to ease for some goods.

Jack Leslie, Senior Economist at the Resolution Foundation, said:
"Rising inflation means that Britain’s cost of living squeeze will continue to get tighter over the coming months, particularly when energy bills jump in April.

“The drivers of inflation are becoming more broad-based, though still goods-focused, and will therefore affect everyone across society. Output price inflation – a leading indicator of wider inflation – eased in December. This may be a blip, but it could indicate an easing of price pressures.

“Periods of sustained inflation over five per cent will be a new experience for a new millennials and Generation Z, and a throwback to older generations who remember the 1980s. However, the impact of high inflation in terms of shrinking pay packets is becoming wearily familiar to younger workers, who have already experienced three sustained periods of falling real wages in their short careers."