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Feeling the crunch – why do we seem so poor?
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| (C) Rex Pictures |
The cost of food and fuel have been soaring for months, yet the inflation rate for January was 2.2%. Does it feel like your cash flow has tightened by a lot more than that? Find out how you can beat rising prices and even save some money
The official inflation rate increased during January, as revealed this week, by 0.1% to 2.2%. Yet with house prices falling, the stock market diving and lending squeezed, for many people it can seem that prices are rising more quickly than those figures might suggest.
This may be because the cost of many basic goods is rising by much more than the rate of inflation.
For months it has been reported that food prices have been climbing, with official figures revealing that costs have risen 6.6% over the past year.
The price of dairy goods has risen a stomach-curdling 15.4% since January last year. Meat prices are 7.8% higher than a year ago, and being vegetarian won’t help you put much more food on your plate as world rice prices have gone up 60% over the last year.
E.ON was last week the latest energy supplier to increase its costs, up 15% for gas and almost 10% for electricity. Of the six main energy companies, only Scottish and Southern Energy hasn’t raised its prices in recent months, though it has only guaranteed to hold them until the end of March.
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Just leaving the house can cost you
Even getting to work to pay for these increased costs will end up hitting you in the pocket more than it used to.
The price of petrol has been increasing sharply for years, rising from 71p a litre five years ago to more than £1 a litre today, according to the AA.
Going green might help the environment more than your finances – rail fares went up by an average of 4.8% this year, although some commuters had to face price hikes of 14.5%. Perhaps it’s time to get back on the bike!
Unfortunately for those on a lower to medium income, everyday costs such as energy, food and transport are hard to avoid. Ernst & Young recently reported that 22% of the monthly income of a typical household – a couple with two kids – was left after paying taxes and essential bills, down from 28% in 2003.
The official rate of inflation might be 2.2% now, but what will your bank account look like if it hits 3% in next few months, as Bank of England governor Mervyn King fears it might?
