CPI inflation hit a new 40-year high in June and is expected to rise further later this year
New figures show UK workers’ wages lagged inflation at record levels last quarter.
The Office for National Statistics (ONS) said regular pay – excluding bonuses – rose 4.7% in the months to June. Analysts had predicted wages would rise 4.5%.
It comes after CPI inflation hit a new 40-year record of 9.4% in June and is expected to rise further, peaking at around 11% later this year.
“Real value of wages continues to fall”
The ONS said this caused staff regular pay to drop by 4.1% when CPI inflation is factored in, the biggest drop since records began in 2001.
The figures also showed that the number of employed workers in the UK rose by 73,000 to 29.7 million between June and July, while the unemployment rate rose to 3.8% in the quarter, compared with 3.7% in the previous period .
ONS Director of Economic Statistics Darren Morgan said: “The number of people in work increased in the second quarter of 2022, while the overall unemployment rate and the rates of people not working or looking for a job have changed little.
“Meanwhile, the total number of hours worked per week appears to have stabilized slightly below pre-pandemic levels. Layoffs are still at a very low level.
“However, although the number of vacancies is still historically very high, it has fallen for the first time since summer 2020.
“The real value of wages continues to fall. Barring bonuses, it’s still falling faster than at any time since comparable records began in 2001.”
Job vacancies hit 1.274 million in the three months from May to July and fell by 19,800, the first sign that the UK’s hot labor market may be cooling.
Chancellor Nadhim Zahawi said: “Today’s statistics show that the labor market is in a strong position, with an unemployment rate at its lowest level in the last 40 years – good news in what I understand are difficult times for people.
“This underscores the resilience of the UK economy and the fantastic companies that are creating jobs across the country.”
What makes inflation rise?
The rise in inflation in June was driven by rising fuel and food prices, only slightly offset by falling used car prices.
The ONS said motor fuel costs rose 42.3% in the 12 months to June, the biggest jump on record.
Average petrol prices last month were 184p a liter, up 18.1p since May alone, while diesel rose 12.7p to 192.4p, also a record.
Brits are also being hit by sharply higher food bills, with food and non-alcoholic drink prices rising 9.8% in the year to June 2022 – the highest rate since March 2009.
Grocery prices rose 1.2% mom in June, following similar increases in April and May as higher cost pressures and the impact of the Ukraine war seeped through to supermarket shelves.
The biggest upside came from essential items like milk, cheese and eggs, according to the ONS, but there were also big increases in prices for vegetables, meat and other groceries like ready meals.
Add to that huge hikes in gas and electricity tariffs, with annual inflation at a record 70.2% and more hikes to come.
Chancellor Nadhim Zahawi and Bank of England Governor Andrew Bailey have both pledged to get inflation under control.
The current cap of £1,971 is already a record beating the previous high by 54%, but the next period, which runs from October to December, is expected to rise to £2,980.