Prices soar in stores and consumers face a fall crisis. Official figures show that inflation has increased on target fastest rate in a decade in August , as impact of Covid-19 and Brexit increases cocost of life.
Exceeding forecasts by City economists, the 1.2 percentage point increase in the price index at the consumption was the largest since Gordon Brown handed the data link Bank of England independence to manage inflation in 1997. 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 more difficult challenge for the Treasury: is it really the right time to take more money out of people's pockets?
Despite the surge of the cost of living, it sounds like the plan, with the biggest overnight social security cut planned for universal credit , a public sector wage freeze and increase of national insurance contributions .
September is the month that NHS workers will receive a dollop of extra cash in their wages thanks to the government wage deal announced in July, backdated to April. This will help, paychecks also arrive when staff see their 3% increase in wages erased by the rise in the cost of living.
Combined with the end of leave This month, government plans will remove a significant chunk of demand from an already sluggish economy. Rebuilding better might soon get complicated because of the same, in a reboot of the 2010s, when the recovery from the financial crisis was stifled by the austerity that hit household purchasing power.
Labor and material shortages have weighed on activity in recent months and brought growth close to stall speed . With the Delta variant threatening a tough winter ahead , experts warn the UK economy is heading for tough times.
The alarm bells should ringin the Treasury, again Rishi Sunak seems optimistic. There are reasons the Chancellor can take comfort. The Bank of England expects inflation to fall from a high of close to 4% this year as temporary factors recede.
With the CPI based on the annual change in the price of the basket of goods and services, much of the recent increase reflects a sharp comeback after a record drop last year. As a result, the record price hikes over the past 12 months are expected to continue to set new records over the next 12, and that's unli kely.
The most important factor in August was the chancellor's Eat outside to help ayear earlier, when Sunak's half-price dishes temporarily reduced the cost of living. The ONS said inflation should have been at least 0.4 percentage point lower.
Yet while the Chancellor has applauded for helping household finances last year, pressure is mounting for the opposite reason.
Business leaders warn that a outage could last at least two years and some changes will be permanent, especially Brexit by erecting tighter trade barriers and reducing the supply of European workers in Britain.
The disruption of the supply chain is on its way worst since the 1970s and companies report to record number of Jobs . Shipping costs have quadrupled, the cost of raw materials to manufacturers has skyrocketed and world energy prices have reached record highs.
With growth hitting a hole this fall, economists warn that there is a whiff of stagflation in the air. It will be an uncomfortable time for the Treasury and Bank of England, but even more difficult for hard-pressed UK households.