Families Hit Hard by Higher Than Expected Inflation; RISING COST OF FOOD, PETROL AND UTILITY BILLS BLAMED

Western Mail (Cardiff, Wales), January 19, 2011 | Go to article overview
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Families Hit Hard by Higher Than Expected Inflation; RISING COST OF FOOD, PETROL AND UTILITY BILLS BLAMED


Byline: CLAIRE MILLER ;EMMA POWELL

INFLATION was higher than expected in December, putting more pressure on Welsh families already struggling with price rises.

The Consumer Prices Index (CPI) rose to 3.7% in December from 3.3% in November, official figures showed yesterday. Economists were expecting the rate to rise to 3.4%.

The Retail Prices Index, which includes housing costs, rose to 4.8% in December from 4.7% in November, the Office for National Statistics (ONS) said.

These latest inflation figures do not take into account the VAT rise to 20% on January 4. The rising cost of food, petrol and utility bills was behind much of December's increase.

Transport saw the biggest rise, with fuel up 2.8%, the biggest jump for November to December since 1996.

Petrol prices currently average around pounds 1.29 a litre in Wales.

Food also saw big rises, up 1.6% in a month.

The big freeze pushed up the price of vegetables in December as supplies were choked by disruption to distribution channels and crop damage. The ONS said cauliflowers were particularly badly hit by the Arctic weather, which caused a shortage that led to a 75.6% rise in prices.

There were price hikes across most bread and cereals, aggravated by the wildfires that wrecked Russia's harvest and caused the country to impose an export ban.

Professor Brian Morgan, director of the Creative Leadership and Enterprise Centre, at the School of Management at Uwic, said how badly people are affected by inflation depends on their personal circumstances.

He said: "What you find is that for people on low incomes, inflation is more than 3.7%, they're feeling it as more like 7 or 8%. They're being hit by the VAT rate rise hard, they're being hit by food prices, by fuel prices."

The price rises brought in by utility companies also started to feed through to consumers in December.

The increasing cost of gas and oil as well as an icy month, also led to big increases in utility prices, up 1.4%.

Five of the "big six" energy firms - Scottish & Southern, Scottish Power, British Gas, npower and E.on - have all unveiled bill hikes in the last two months.

High inflation continues to be a problem for savers, who are likely to be seeing the value of their deposits falling in real terms.

Currently basic-rate taxpayers need to find an account paying at least 4.63% on taxed accounts and 3.7% on tax-free savings to ensure their deposits do not erode in value.

Graeme Yorston, chief operating officer at Cardiffheadquartered Principality Building Society, said rates offered to savers were constrained by the need to offer competitive rates to borrowers.

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