Inflation is again, however Sunak is intent on taking cash out of pockets | Inflation

Prices in stores are rising and consumers are facing an autumn crisis. Official figures show that inflation is on fastest rate in a decade in Augustas the effects of Covid-19 and Brexit drive up the cost of living.

The 1.2 percentage point rise in the consumer price index beat City economists’ projections and was the largest since January 1997, the year Gordon Brown later took the Bank of England Independence in fighting inflation. At 3.2%, the CPI is now the highest since March 2012.

Questions will be asked about Threadneedle Street’s response. But there is a tougher challenge for the Treasury Department: is this really the time to start getting more money out of people’s pockets?

Despite the rising cost of living, it looks to be going according to plan, with the biggest overnight social security cut ever planned Universal credit, a Public sector pay freeze and get up National insurance contributions.

September is the month NHS workers get an extra dollop of cash in their wage packages from the government’s July wage agreement, which was backdated to April. While this will help, the paychecks come as well 3% wage increase is being wiped out by the rising cost of living.

Combined with the end of vacation This month the government’s plans will take significant demand weakness out of an already weakening economy. The better construction strategy could soon be messed up by more of it, in a restart of the 2010s when the recovery from the financial crisis was stifled by austerity measures that hurt household purchasing power.

Labor and material shortages have burdened the activity in the last few months and brought growth almost to a standstill. With the delta variant threatening a difficult winter is ahead, experts warn that the UK economy is heading for a difficult phase.

The alarm bells should be ringing in the state treasury Rishi Sunak seems sanguine. There are reasons why the Chancellor can comfort herself a little. The Bank of England expects inflation to decline from a high near 4% this year as temporary factors recede.

Since the CPI is based on the annual change in the price of the basket of goods and services, much of the recent surge reflects a sharp setback after a record drop last year. Accordingly, record price increases in the last 12 months would have to set new records again and again in the next 12, and that is unlikely.

The biggest factor this August was the “Chancellor”“Eat up to help“A year earlier, when Sunak’s half-price dishes temporarily cut the cost of living. The National Statistics Bureau said inflation should have been at least 0.4 percentage points lower as a result.

But while the Chancellor was praised for her domestic help last year, the pressure is growing for the opposite reason.

Business leaders warn of delivery disruptions hold for at least two years and some changes will prove permanent, especially from Brexit the establishment of tighter trade barriers and the reduction in the supply of EU workers in the UK.

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The disruption of the supply chain is in full swing Worst since the 1970s and companies report a Record number of job vacancies. Shipping costs have quadrupled, raw material costs for manufacturers have skyrocketed, and global energy prices have hit record highs.

As growth hits a slump this fall, economists warn that there is a hint of stagflation in the air. It will be an uncomfortable time for the Treasury and the Bank of England, but even tougher for the UK budget under pressure.