The consumer prices index rose by 9% in the 12 months to April, up from 7% in March, likely the largest annual increase since 1982, new figures by the Office for National Statistics show. The continued rise in inflation is leading to growing concerns that a recession is now all but inevitable.

 

The highest contributors were energy prices, as the increase in the price cap – aimed at protecting consumers – led to steep increases in April. Fuel pump prices and second hand cars were among the culprits as well, and a return to 20% VAT in hospitality meant restaurant and hotel prices went up too. Recreation and culture was another contributor to inflation. 

 

 The Consumer Prices Index including owner occupiers' housing costs rose less than CPI, by 7.8% in the 12 months to April 2022, up from 6.2% in March. The owner occupiers' housing costs element and council tax were the main drivers for differences between the CPIH and CPI inflation. 

 

   

Commentators have nicknamed the month ‘awful April’ for its shock increases, which also included higher mobile phone tariffs. 

 

“April blasted through budgets like a perfect storm as a resurgence of global demand clashed with a sudden supply shock brought about by the war in Ukraine. In the UK the added burden of that price cap change has propelled it to the top of the G7 inflation leader board, a plaudit no country wants to burnish,” said AJ Bell analyst Danni Hewson. 

 

She predicted that there would be little respite in coming months as higher input costs for manufacturers feed through to consumers. 

 

“Whilst the intensity of last month’s shock won’t be repeated, at least until the next price cap change in October, the one thing consumers really need – price drops – aren’t likely for many months to come. Pressure has been building for businesses to protect consumers from the worst of the hikes and in some cases that has been possible, but not all businesses have the kind of cushion which will allow them to nibble away at margins,” she said.  

 

Smaller businesses in particular are fighting their own battles with inflation, realising that “the much-needed dream of a post-Covid boom has disintegrated, replaced by fears that recession has already grabbed hold”. 

 

 

The inflation figures follow a labour market release by the ONS which showed that while unemployment has dropped to its lowest since 1974, wages excluding bonuses fell further behind inflation, hitting public sector workers worst.  

 

The high employment figure is also to be taken with a pinch of salt; part-time work has increased, perhaps as people have to take on multiple jobs to meet living costs, self-employed numbers are down and the number of those not looking for work – mainly in the 50-64 age bracket – has increased materially.  

 

“Things are set to get even worse, because the [Office for Budget Responsibility] is predicting the biggest fall in living standards in a generation,” said Sarah Coles, senior personal finance analyst at Hargreaves Lansdown. 

 

The UK’s inflation figures stand in contrast to those in the US, where most believe the peak is past, said Jamie Niven, senior fund manager at Candriam Asset Management.  

 

“Central bankers, market participants and consumers alike will keep one eye on Q4 this year when another round of price cap increases will come into play, meaning this period of extremely elevated inflation should remain in play for some time,” he predicted.  

 

Despite the Bank of England overshooting its 2% inflation target and an extremely strong labour report, two members of the Monetary Policy Committee wanted to signal no further rate hikes at the meeting earlier this month, noted Niven.  

 

“I suspect we will continue to see the Bank hike in 25bps increments over coming meetings whilst keeping a close eye on the impact on the real economy and the consumer’s cost of living crisis,” he said. 

Union Unite has warned that it will not accept calls for wage restraint to avert an inflationary spiral, as suggested by BoE governor Andrew Bailey, saying calls for reflection should be directed to FTSE 100 CEOs who have seen their pay packages swell by more than one-third.

“The alarm bells are ringing very loudly now. Earnings are being pummelled, the government is, shamefully, turning its back on those in need and employers are squeezing wages. So, we will absolutely take no more lectures on pay restraint from the millionaire governor of the Bank of England," said Unite general secretary Sharon Graham.

She said Bailey should direct his attention to FTSE100 chief executives, whose pay rose by 34% on average to £4.1m a year. “Ask them to pause to reflect about the scale of their corporate greed," she said.

“Workers, on the other hand, are at least £70 worse off than this time last year and are being battered by spiralling food and energy costs. Telling them to pay for a crisis which is absolutely not of their making is obscene and totally unacceptable to Unite," said Graham, adding that "employers who can pay decent wages but won’t will face industrial action".