Truflation Data Insights: UK September 2022

Autumn has finally arrived in the UK with September’s sunshine and, at last, rain! However, amidst the bright weather, inflation and the cost of living crisis continue to dominate headlines and worry everyone, including the new prime minister, Liz Truss, and the Bank of England. This week’s ONS release was full of surprises and contradictions. Let’s dive into the numbers and see what our data insights reveal.

Firstly, inflation is everywhere in the UK economy. Its energy, food, goods, and services are all tracking at extraordinary levels. Our Truflation UK CPI is 16.32% at the time of writing (15th September 2022), a Truflation all-time high. In the ONS data release, the UK CPIH is 8.6% for August, surprisingly down by 0.2% bps.

The ONS numbers, in many ways, don’t make sense when you dig deeper. Our Truflation UK CPI was up by 2.2% from 15th August to 15th September, with very few categories in our index showing any meaningful decline.  

The following categories are driving the increases we have seen in our overall UK CPI:

• Food has increased 1.2% and is up 8% YoY compared to September 2021, driven by higher import costs and lack of supply due to energy cost pressures & drought. See our Truflation Deep Dive: Food Insecurity.
• Housing increased 9.7% up 24% YoY compared to September 2021.  This reflects higher costs for property owners, with the increase in interest rates by the Bank of England affecting mortgage and debt repayments and higher rents due to a tight rental market.
• Transport decreased 1.5% and was up 14.5% YoY compared to September 2021. UK petrol prices at the pump have come down over the last month by roughly 4%. However,  this only accounts for 1.74% of household expenditure and is the only category in which we have seen a substantial decrease over the last month.
• Utilities increased 9.9%, reflecting the steep rise in household energy costs, which accounts for 10% of household expenditure in our index and is up 84% from September 2021.
• All other categories in our UK CPI remained relatively stable over the last month.

The only relief for the UK CPI may be the government's plan to offset the energy price cap increase of 80% due in October 2022 through government-funded relief announced last week. Although this will help consumers and businesses with the cost of living crisis, it puts the Bank of England between a rock and a hard place.  With government debt linked to inflation and the pound sterling dropping against the USD, higher prices' inflation problem will only worsen as interest rates inevitably rise.

All the indicators are blinking red for inflation rising this year; slowing it down needs stronger medicine from the Bank of England. Economic estimates predict inflation will increase further, with UK interest rates expected to surpass 4% by early 2023.

Having better inflation data can help businesses and consumers make better decisions. UK inflation is already ‘baked in’ 2022, with energy prices rising, putting pressure on the Bank of England and the UK government’s finances. There is not much wriggle room left for consumers’ finances or the Bank of England.

Written by CeAnn Simpson

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Truflation is an economic data aggregator serving independent, unbiased, real-time data on-chain and off-chain. Truflation’s goal is to help individuals, investors, companies, and institutions make more informed decisions by accessing independent and unbiased economic information.