We hear about it on the news every day. What is more, we experience it for ourselves whenever we go to the supermarket, get an energy bill or fill our cars up at the pump. Prices are skyrocketing. The cost of living crisis is real.
According to research company Kantar, grocery prices were 5.9 per cent higher in April than they were a year earlier, the largest increase since December 2011. This means the average food bill could increase by £271 per year, as prices continue to rise.
As Fraser McKevitt, head of retail and consumer insight at Kantar, explains: “A lot of this is going on non-discretionary, everyday essentials which will prove difficult to cut back on as budgets are squeezed.”
As a result, shoppers are carefully watching their spending, and making savings wherever they can. They are choosing supermarket own brand products and turning to discount retailers, such as Aldi and Lidl to ease the pressure on their household budget.
Research shows, that while the number of times people are visiting the supermarket remains steady, they are not buying as much when they are there, and the average basket size has dropped by 4.5 per cent to £22.39.
When you consider that inflation is at seven per cent, the highest rate for 30 years, with the Bank of England warning it may reach ten per cent within months, this is inevitably having an impact on people’s wallets.
The soaring food prices have been caused by a combination of factors, including supply chain issues, the Ukraine war and rising raw material costs. Firms are increasingly passing on the higher costs they are facing to customers.
However, it is not just food prices that are being affected. Budget fashion chain Primark, has warned it will have to introduce selective price increases across its new clothing ranges, and retailer Next, has warned that its homeware items will jump up in price by thirteen per cent.
In addition, fuel costs, household bills, the rate of VAT, air passenger duty, car tax, heating bills, cost of postage, rail fares and higher interest rate of mortgages, are all on the increase.
The one item that is not increasing in parallel are wages. Figures from the Office for National Statistics show, that although wages rose by 3.8 per cent between November and January, when taking rising prices into account, regular pay showed a one per cent fall from a year earlier. This means people can buy fewer goods and services than a year ago.
With the cost of living crisis being described as the single biggest domestic issue, what steps can you take to ease the financial pressure?
It is vital that your money is working as hard as it can. Make sure any spare cash is not left open to the ravages of inflation. As saving accounts have been offering poor returns for some time now, consider investing in the stock market long term. A natural alternative if you are trying to beat inflation, this will give you the opportunity to invest in a range of different asset classes, which enables you to mitigate risk. By investing over a period of time, you are more likely to ride out the waves.
If you are wondering how best to tackle rising inflation, and make the most of your savings, do get in touch for some practical financial advice. Be aware that the value of investments can fall as well as rise, and that you may not get back what you invest.
