CMI reacts to Consumer Price Inflation
Posted on 22nd May 2022
Reacting to the release of the Consumer Price Inflation, Anthony Painter, Director of Policy at CMI commented "Prices for households and businesses have surged to their highest level in 40-years at 9.0% in April 2022, up from 7.0% last month.
April's inflation was fuelled by higher commodity prices continuing to be passed on to households, Ofgem's 54% rise in the energy price cap taking effect and the return of the 20% VAT rate for the hospitality sector. This may be the peak of the inflationary episode, but price levels will continue to remain high, as food and oil prices remain elevated, generating the biggest squeeze on household finances in four decades - engines & energy are set to run dry. However, the Governor of the Bank of England's warnings of possible 'apocalyptic' increases in commodity prices due to the ongoing Russian invasion of Ukraine should not go unheeded.
Although unemployment is at its lowest in over four decades, hit by the cost of living squeeze, regular pay continues to lag behind rising prices. Coupled with a shortage of workers, businesses will face demands of higher pay whilst enduring higher input prices. In response, if unaddressed, shrinking business activity will likely soften hiring. Such a 'push me-pull you' economy will be a huge drag on economic growth.
Employers will need to support workers wherever they can through pay, bonuses and benefits. Many workers, particularly in highly skilled sectors, will be able to leverage current high vacancy levels to secure better packages. Many workers will not be so fortunate and that is why additional Government support through the tax and benefits system remains paramount- even after planned increases to national insurance lower earnings limit in July."
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