Prices rising at the fastest pace for 25 years: Inflation stalks the UK economy
Prices are rising at the fastest pace in at least a quarter of a century as businesses pass on the costs of labour, materials, shipping and energy to consumers.
Firms in the services sector, which range from transport companies and hairdressers to pubs and restaurants, hiked their prices in September at the fastest rate since data began in 1996, according to the Purchasing Manufacturers’ Index (PMI) from IHS Markit.
Manufacturers are also putting up prices as inflation once again stalks the global economy.
British companies have been battling against a storm of cost pressures, as labour shortages in the aftermath of the pandemic and Brexit have combined with a scarcity of fuel and escalating prices of raw materials.
Wholesale gas prices have soared to record highs across Europe while the price of oil has almost doubled in the past year to close to $83 a barrel – the most expensive since 2018.
Copper has jumped by more than a third over the past year which, when combined with the shortage of semiconductors, will bump up the prices of electrical products.
And cotton has also spiked above $1 a pound for the first time in more than a decade, rising more than 42 per cent over the past year, which could mean more expensive clothes.
Even arabica coffee has jumped almost 73 per cent over the past year to levels not seen since 2014, meaning Britons could soon be feeling the pinch when visiting their local cafe.
Inflation hit 3.2 per cent in August and is widely expected to surge past 4 per cent by the end of the year in a headache for Chancellor Rishi Sunak and the Bank of England.
Boris Johnson yesterday insisted inflation was not spiralling out of control, and that the cost pressures were simply ‘the stresses and strains you’d expect from a giant waking up’.
But information provider IHS said that ‘rapid rises in fuel, energy and staff costs were passed on to customers in September’, and that the same factors were causing demand for services to soften in a worry for business.
Tim Moore, economics director at IHS Markit, said: ‘The supply chain crisis put a considerable brake on recovery in the UK service sector during September. Survey respondents widely noted that shortages of staff, raw materials and transport had resulted in lost business opportunities.
‘Consequently, new orders expanded at the slowest pace since the end of the winter lockdown, while backlogs of work accumulated as service providers struggled to find candidates to fill vacancies.’
He added that the spike in costs was felt even before the fuel crisis and surging energy prices hit at the end of the month.
The composite PMI, which takes in both the services sector and the manufacturing sector, also pointed to the biggest rise in prices since the combined data began in 1999.
In the eurozone, firms saw their costs shoot up at the joint-fastest rate since 1998, while prices charged to consumers rose at a pace only surpassed by June and July.
Chris Williamson, chief business economist at IHS Markit, said: ‘The current economic situation in the eurozone is an unwelcome mix of rising price pressures but slower growth. Both are linked to supply shortages, especially in manufacturing.’