Inflation is hitting low-income families the hardest, with some now spending 1/3 of their budget on food
02/03/2022 // Cassie B. // Views

Rising food prices are hitting families around the world hard, and the lowest-income households are now spending as much as a third of their budget on food in some places as a result of inflation.

This is according to the latest data from the Office for National Statistics in the UK. They found that Brits who fall into the lowest income bracket are currently spending a third of their budgets on their food and other household bills. Meanwhile, the richest Brits are spending just a fifth of their money on the same expenses.

For lower-income households, the cost of living squeeze is being driven largely by rises in the prices of food, utilities and rent, while higher-income households are mostly experiencing inflation via rising transportation costs as well as higher prices for recreation, accommodation, culture and restaurants.

Despite these differences, low- and high-income families alike have been experiencing similar overall annual inflation rates for the last seven years. According to ONS estimates, low-income households experienced annual consumer price inflation of 5.3% in December, while higher income households experienced inflation of 5.5%. Both retired and non-retired households are experiencing similar levels of inflation.

Ahead of the release of the data, some experts expressed concerns about the use of the Consumer Price Index on the grounds that it seriously underestimates the impact that inflation has on poorer households.

ONS Head of Inflation Mike Hardie said: “While the headline rates of inflation are similar for different groups, this hides important differences at a detailed level.


“It’s important to note that these experimental data are derived using the same 700 representative items used to calculate headline inflation, and including a wider range of items may show bigger differences of each group,” he added.

Hardie said that their work on household costs indices, which have been designed to serve as a better way of measuring households' direct spending, will provide better insight into the experiences of different groups of society.

The ONS is also looking into expanding its inflation work to provide a clearer idea of the way in which prices are rising. For example, supermarket scanning data will be used to show price moves.

The Royal Statistical Society's Chief Executive, Stan Westlake, said that the household cost indices set to be released in May will better reflect household experiences and will include items such as mortgages, other interest payments, and student loan repayments and will not be skewed toward more fluent households the way that other consumer price indexes have been.

Resolution Foundation Senior Economist Jack Leslie said: “Increasing food price inflation and the looming energy price cap rise in April will disproportionately affect families already struggling to get by. These families should be the priority for the government’s cost of living crisis response.”

Shoppers getting hit with steep price hikes as inflation hits 30-year high

The BBC reports that shoppers in the UK were hit with the highest price rise in nearly a decade after shop inflation nearly doubled between December and January. This sharp rise in inflation, which jumped from 0.8% in December to 1.5% in January, was largely driven by increases in the prices of non-food items such as furniture and flooring. Supply problems, higher shipping costs and rising energy prices around the world have been hitting retailers hard, many of whom are passing the pain on to their customers.

Many families are struggling with what has been termed a cost of living crisis in the UK as energy bills and fuel prices continue to climb. Food inflation, meanwhile, rose from 2.4% in December to 2.7% in January. Domestic produce in particular has been hit hard by poor harvests, rising global food prices and labor shortages.

The latest official figures show inflation hitting its highest rate in 30 years, and much like in the U.S. and elsewhere in the world, there are plenty of signs this inflation won’t subside any time soon.

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