UK Retail Inflation Report summary
September 2021
Period covered: Period covered: August 2021
Note: This report summary is one or two months behind the current month as standard reporting practice. The content is indicative only and incomplete with certain data undisclosed. Become a member to access this data or take out a free 30 day membership trial now.
CPI inflation jumped to 3.2% YoY, from the 2.0% rise in August – the sharpest rise since March 2012. This was above economists’ forecasts of a 2.9% rise. The 1.2 percentage points (pp) rise on the previous month was the largest ever recorded (since records began in 1997).
Much of the rise was driven by base effects a year ago with the Eat Out to Help Out scheme (EOHO) and VAT reduction in the hospitality sector driving down restaurant prices in August 2020. Conversely, prices rose this year in the absence of the EOHO scheme. Resultantly, Restaurants & Hotels made the largest upward contribution in the CPI inflation rate (0.69 pp), driven by the Catering Services component.
Food & Non-alcoholic Beverages (0.11pp) also made a large upward contribution, driven by rises across the food basket.
Food inflation is being driven by a combination of shortages of staff within the supply chain (particularly fruit and veg pickers, meat processors and HGV drivers) and rising freight and commodity price inflation
Despite much of the rise in August being driven by temporary base effects, ongoing shortages of labour and disruptions within the supply chain will continue to exert upward pressure going forward.
The ONS said that both input and output (factory gate) inflation are rising at their fastest rates in a decade, driven by a significant rise in the cost of raw materials.
The small margins retailers operate on will inevitably lead to some price rises being passed on to consumers.
This comes as households prepare themselves for the sharpest rise in energy bills for a decade at the beginning of October as wholesale gas and electricity prices reach record highs.
Take out a FREE 30 day membership trial to read the full report.
CPI vs Core Inflation
Source: ONS
