Inflation rates are at an all time high, impacting the cost of everyday goods and services.
Food prices are at reportedly some of the highest levels in decades, worsened still by the ongoing war in Ukraine. It is expected that food prices will stay high across the rest of 2022 and could have a detrimental impact on many, especially low-income households.
Rising Inflation Rates
This year, UK households are experiencing some of the highest inflation rates in recent decades with more than 80% of UK adults reporting increased cost of living. When looking at how their expenses were affected, 92% reported increases in the price of food, overtaking both fuel (76%) and electricity (80%).
Inflation rates are at a 30-year-high with economists warning that rates could soar as high as 10% by Autumn; this is a huge contrast from the target which is 2%.
One of the most prominent areas in which inflation and subsequent raising of interest rates already experienced and to follow is in the property market.
Mitchell Watkins of ProperEaze said: “When inflation rises, interest rates are increased by central banks and governments. Consequently, peoples’ mortgage payments will rise and this will start to bite. Higher monthly mortgage repayments mean some people will have to sell their homes to get by and to make sure they don’t default.”
The Impact of the Ukraine War
The ongoing war between Russia and Ukraine is driving up not only fuel and energy prices but is also affecting prices of food and the overall supply chain. Much of the world’s wheat exports come from regions in Ukraine and Russia which has meant a dramatic surge in prices of wheat and wheat alternatives. Subsequently, the global cost of wheat-based foods has soared; in the space of a month, global cereal prices increased by 17%.
UK Households
Due to the high inflation, households are finding it increasingly difficult to pay for their everyday goods which have suddenly become unaffordable. Data shows that 22% of households are already using their savings just to cover their essential items. In spite of these soaring prices, household income is not increasing at nearly the same level and is failing to keep up with the rising costs. This means that basic items, such as food expenses, are becoming increasingly unaffordable.
Samuel Davies of Kallyss.com commented: “UK households are seeing everything increasing in price; from petrol and utilities to food and even clothing. The knock on effects of inflation and the associated pinch are being felt by everyone, everywhere and unfortunately, it does look like things will get worse before they get better.”
The effects of inflation are being felt most keenly in households where the highest proportion of disposable income is spent on food expenses. Low-income households especially are struggling to keep up with their basic spending due to the huge price hikes and there has been a far greater dependency on food banks. In addition, many low-income households are looking to low-nutrition alternatives or skipping meals, meaning that the inflation rates are indirectly affecting their long-term health and nutrition.
Food Prices at an All-Time High
According to the UN Food and Agriculture Organisation’s food index published in April, global food prices have reached an all time high with food commodities costing approximately one third more than they did at the same time last year. Just looking at month-on-month increases, there was a jump of 12.6% in the Food Price Index – the highest figures on record.
Experts have predicted that as long as the war between Ukraine and Russia continues, prices will continue to increase and inflation rates will continue to remain high. In the Food Price Outlook published by the U.S. Department of Agriculture, it was reported that the cost of food could increase from anywhere between 2.5% and 3.5% across the rest of the year.
