Articles17 May 2023
More disclosure on the cards for businesses
One downside to running a limited company is set to change
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Annual inflation in 2022 was 10.5%, but not all components rose by double digits
Source: ONS.
Annual inflation, as measured by the Consumer Prices Index (CPI), was 10.5% in 2022 against 5.4% in 2021. The official CPI calculator, the Office for National Statistics (ONS), says that the last time inflation was as high was in 1981. But what drove the inflation indices to four-decade highs last year? As is often the case, a simple economic question does not lead to a straightforward answer.
The hierarchy graph above offers a visual response:
The two main causes of 2022 inflation – food and gas prices – help to explain why inflation is expected to drop sharply in 2023. Both rose in response to the war in Ukraine and as that is now a year ago, prices should start to stabilise – indeed wholesale gas prices have fallen from their peaks.
The consensus is for the annual CPI number to end the year around 5%, less than half of 2022’s level but still enough to mean any long-term financial plans need to build in the value-eroding effects of inflation.
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