Inflation rate in Europe 2022: how does the UK compare?

Boris Johnson’s government has repeatedly declared the cost of living crisis a ‘global problem’ – so how do inflation rates compare in other countries?

So how does the UK’s CPI compare to those in Europe?

NationalWorld has analyzed the latest data from our nearest neighbors to see if the UK’s inflation rate lives up to what the government says.

Britain’s CPI rose 0.1% between December and January, meaning goods and services cost 5.5% more than a year ago (Image: AFP/Getty Images)

What is the UK CPI rate?

The CPI is an internationally comparable method of tracking inflation for a typical basket of everyday goods and services.

Prices for everything from food to clothes to cars are included, with the basket weighted according to the most important household items.

UK inflation is at nearly 30-year highs and household budgets are not keeping up (Image: AFP/Getty Images)

For example, milk and bread have a greater impact on the overall inflation rate than smartwatches.

As well as being an important yardstick against which we can determine whether or not to change our consumption habits, the CPI is also used to set pensions, benefits and state statutory sick pay.

In July 2022 (the most recent month for which we have data) the CPI rate in the UK was 10.1%.

This means that the overall basket of goods costs 10.1% more than in July 2021.

To put that into perspective, the CPI inflation rate in July 2021 was just 2%.

How does the UK compare to Europe?

When NationalWorld first compared the UK’s inflation rate to those of Europe in January 2022, we found it had one of the largest proportional year-on-year increases in Europe. other – only Spain, Belgium and Ireland recording larger jumps.

But in July 2022, the UK is just behind the Netherlands.

The main difference between the UK and other countries is in energy bills.

Ofgem’s 54% cap increase in April 2022 pushed Britain’s CPI up two percentage points and briefly pushed its CPI above those of its closest European neighbours.

Boris Johnson said his government was still considering cost-of-living support measures (Image: Getty Images)

According to the latest CPI for July 2022, Spain (10.8%) and the Netherlands (10.3%) are the only major economies with higher inflation than the UK (10.1%) .

Spain’s 0.6 percentage point month-on-month increase was driven by household bills, with electricity being the main driver of the increase.

However, the country’s government says it expects inflation to slow in the second half thanks to the 30 billion euros in support it has announced this year, including an electricity tax cut.

Meanwhile, the Dutch saw their inflation rate increase by 1.7 percentage points between June and July.

The country’s official statistics body, CBS, said the rise was due to higher heating and electricity costs, which had risen 108%, as well as more expensive property rentals.

On July 1, the country’s government reduced VAT on energy from 21% to 9% – a reduction that will be in place until the end of 2022.

This could mean that Dutch inflation is softening when the August data comes out.

While it also saw a similar increase in food prices in the UK, fuel prices in the Netherlands fell month on month from €2.35 per liter to €2. €21 following a reduction in fuel duties.

Diesel also fell from €2.14 per liter to €2.07.

Not all other major European economies have seen such large increases in their CPI inflation index.

France saw a monthly rise of just 0.3 percentage points, while Germany and Italy even saw monthly drops in their CPI.

The war in Ukraine continues to fuel inflation (Image: AFP/Getty Images)

In the case of Germany, government support is behind the drop in its CPI, according to its official statistics body Destatis.

In the case of Belgium, an important contextual element to note is that all wages in the country are linked to the CPI; Thus, when inflation rises, consumers do not lose purchasing power.

Is the UK in a better or worse position than Europe?

The problems faced by European countries are broadly similar to what we have here in the UK.

The Russian-Ukrainian war, the recovery from Covid-19 and supply chain bottlenecks are all common themes in inflation, with price increases being most acute in energy, oil and gas. food and transport.

The differences lie in politics.

What this situation demonstrates is that the UK government is not hostage to existing global pressures as it claims.

Unless the Kremlin decides to stop European gas exports, this will remain the case.

Liz Truss and Rishi Sunak traveled to Scotland for their final Conservative leadership campaign event. (Credit: PA)

The comparison with Europe also shows that government spending can be increased without fueling inflation – although some countries with high inflation rates, such as Spain, could show where the limits of government intervention lie.

Ultimately, all of this means that the next UK Prime Minister – whether Liz Truss or Rishi Sunak – will hold many of the levers that could determine the next direction of UK inflation.

The two leadership candidates have differing opinions on what to do.

Liz Truss wants to promote economic growth through universal tax cuts – a move that could increase inflation.

Rishi Sunak wants to prioritize reducing inflation before introducing any major growth-promoting measures.

How well the winner walks this economic tightrope will determine the course of inflation in the UK from this winter.

Mary I. Bruner