Cost-of-living gap widens for poorer households, ahead of big inflation rise next month

Inflation increased slightly in May, but soaring petrol prices will drive a bigger rise in June, while low-income households continue to face the greatest cost-of-living pressures, the Resolution Foundation said today (Wednesday) in response to the latest ONS inflation data.

CPI inflation increased from 9 to 9.1 per cent, while CPIH rose from 7.8 to 7.9 per cent, driven primarily by household services (such as rising energy bills), transport costs and food prices, the latter of which has seen the 12-month inflation rate rise 9.9 percentage points over the past year (going from -1.3 to 8.6 per cent).

The Foundation notes that these drivers of inflation mean that poorer households are facing higher inflation than better-off households. Its analysis shows that headline inflation for the poorest tenth of households is around 10.3 per cent, compared to 8.7 per cent for the richest tenth. This 1.6 percentage point cost-of-living gap is the largest it’s been since comparable records began at the start of the 2000s.

It adds that average petrol prices were 165.9p at the time of the latest inflation data collection, but they are now 186.9p. This will put inflation back on a rising path next month (June).

Jack Leslie, Senior Economist at the Resolution Foundation, said:

“The latest inflation is worryingly high, but will feel low for consumers as it predates the big spike in petrol prices over the past month.

“With inflation also being driven by rising energy bills and food prices, poorer households are experiencing the greatest cost-of-living pressures, with their own inflation rate already in double digits.

“This is why the Chancellor was right to prioritise vulnerable families in his latest cost-of-living support via additional means-tested flat-rate payments, and is right to uprate benefits in line with this September’s inflation next year.

“With the economic outlook so unclear, no-one one knows how high inflation could go, and how long it will continue for – making fiscal and monetary policy judgements particularly tough.”