The Places You Will See Your Spending Increasing, As Inflation Rises

Some insights from Admirals;

Throughout the 21st century, inflation in the UK has been manageable. In fact, from the early 1990s, it has stayed at the optimum level of 2-4% for nearly 30 years. However, a recent combination of factors has caused the price of goods and services to skyrocket. Worryingly, the goods that have increased in price the most are essential items.

The Bank of England attempted to intervene with a new monetary policy following a steep rise in inflation rates; however, inflation over the last two years has also been coupled with an economic downturn which means that the usual factors used to curb inflation could also cause the economy to spiral into a recession.

For many of us, being able to pay the bills and give our families a roof over their heads is all we want in life. So, the intricacies and specifics of economic and central banking policy don’t concern us. We just want to cover our bills, pay our rent or mortgage and have enough left to build some savings.

Energy bills

I’m sure you don’t need to be reminded of the turmoil that energy prices have caused over the last 18 months. Initially, the rise in energy prices was attributed to the war in Ukraine and disruptions along the supply chain, which have caused the price to climb.

However, energy companies have posted record billion-pound profits over the last few months. This has led some critics and analysts to call for a full investigation into why prices increased so drastically. Initially, the increase was justified; there was a standard variable that seemed to be causing the supply to drop at a time of high demand. This is basic economics.

Under the guise of these external factors, the bottom line of profit was still so gross there was widespread and justified outrage. Energy bills are crucial in the price of goods and services, not just to heat our homes. Gas and oil are used at all levels of the food chain.

Unfortunately, these prices don’t appear due to slowdown. They have more than doubled since January 2022, and people are using large portions of their wages to stay afloat. We hope we are wrong but we expect to see prices at the petrol pump continue to increase throughout 2023.

Food prices

The cost of oil and the rise in the cost of living have resulted in food costing a lot more than it did 18 months ago. It isn’t common knowledge that oil is used in the production and distribution of food on a mass scale. When the price of oil and energy rises, the entire supply chain needs to increase its prices, and ultimately, the end user feels the harsh brunt of this impact.

Necessities such as bread, meat and milk have exploded in price. It has caused people who live on the poverty line to have to choose between necessities such as food and housing instead of having access to both.

The knock-on effect has caused substantial economic issues. The rise in costs leads to fewer people eating out which means businesses earn less. This has led to some businesses closing down and people losing their jobs.

The frontline impact for the consumer equates to higher bills at the checkout. Although inflation is expected to peak and curtail somewhat, the prices won’t decline, and wages haven’t increased in line with inflation. The overall impact has been a substantial negative. With food prices doubling over the last 12 months, the long-lasting effect will mean economic turmoil for many people.

Mortgage and rent costs

Unfortunately, the mortgage industry is another critical area that feels the seismic impact of inflation. Although inflation has been coupled with economic uncertainty, which initially led the government to hold off increasing interest rates, inflation soon ended up in the double figures.

As a result, the Bank of England increased interest rates to encourage saving and decrease inflationary pressures.

For those already struggling to afford the cost of items in supermarkets, this was another significant blow as mortgage rates increased in line with the interest rate rise. Insolvency rates continued to rise throughout 2022 thanks to a combination of these variables causing suffocating pressures on consumer finances.

Conclusion

It isn’t all doom and gloom, although it may seem very difficult at the moment. The cost of living has accelerated far beyond what anybody could have anticipated 18 months ago.

Despite this, an increasing number of analysts and economists believe that inflation is due to subside somewhat over the next few months. Hopefully, we have seen the end of this rampant inflation which has pulverised mortgages, savings and food prices for over a year.

About alastair walker 12127 Articles
20 years experience as a journalist and magazine editor. I'm your contact for press releases, events, news and commercial opportunities at Insurance-Edge.Net

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