What is the impact of the increase in inflation?

We now have a much better idea of what we are facing over the next 12 months.

The Consumer Prices Index (CPI) rose by 3.3% in May, up from 3% in April,  the fastest rate since the CPI measure began in 1997, although, to be honest, that was not that long ago! It is thought that the index will exceed 4% in the next 12 months.

On the face of it these figures would not seem to be that bad, but I think that they are bad news to the huge number of people in the UK who do not have highly paid jobs and plenty of disposable income! 

The idea of a price index is that it measures changes in prices of a ‘basket’ of goods and services that people, on average, spend their money on.

So when we look at the items with the biggest impact to ordinary people we find that that they are food and non-alcoholic drinks! Meat products and vegetables in particular are increasing in price.

The price of oil is nearly double that of 12 months ago. Most people have been affected the price of petrol and diesel at the pumps. What they probably also realise is that they are paying for the extra fuel costs of the haulage companies and the increased energy costs of food production in the factories and on the farms.

Gas prices are more than double what they were 12 months ago. Household energy bills are going up and will continue to be high whilst the wholesale price of fuel is high.

What I can see behind this headline inflation figure is a big impact on the lower paid and those with little disposable income. Of course there is good news. Apparantly DVDs are now cheaper which is a relief!

The increases are on the items and services that people need to buy all the time. But there are very many people in the UK who simply do not have the money to pay the extra. They are going to have to find the money for gas and electric bills or they will be cut off. They will have to find the money to pay for their basic food requirements and necessities. They will have to pay their loans and credit card bills

But they will cut back on other items, which in turn will impact the shops and other services that are not essentials.

I do urge people to start  cutting back their expenditure now! Avoid borrowing money to buy higher value items even if they seem to be a bargain!  Don’t borrow more money or increase your credit card debt. Do everything that you can to avoid spending money and try to have a credit balance in your bank account. There are difficult times ahead. Start doing what you can now to help yourself over the next 12 months.

I have to take this view because it is the right thing for families to do! It won’t help the shops and other non-essential businesses unfortunately!

Tags: cost of living, debt, families, household, recession