{"id":18934,"date":"2022-07-28T01:00:00","date_gmt":"2022-07-28T00:00:00","guid":{"rendered":"https:\/\/www.economicsobservatory.com\/?post_type=question&p=18934"},"modified":"2022-07-27T22:21:25","modified_gmt":"2022-07-27T21:21:25","slug":"how-is-the-cost-of-living-crisis-affecting-retailers-and-their-customers","status":"publish","type":"question","link":"https:\/\/www.economicsobservatory.com\/test\/how-is-the-cost-of-living-crisis-affecting-retailers-and-their-customers","title":{"rendered":"How is the cost of living crisis affecting retailers and their customers?"},"content":{"rendered":"\n

The cost of living crisis is shorthand for the rapid escalation in the prices of products and services<\/a> as wages struggle to keep up. The rate of price growth \u2013 known as inflation \u2013 is currently outstripping income growth, which has largely stagnated. This means that people\u2019s wages are going down in value in real terms.<\/p>\n\n\n\n

Inflation has been rising for several months and has now reached a 40-year high<\/a>, climbing to 9.4% in the year to June 2022 (see Figure 1). This is due to irregularities and disruptions in demand and supply, and to increasing energy prices. Demand patterns have been inconsistent as the Covid-19 pandemic waxes and wanes, affecting production and distribution, and disrupting global supply chain availability and costs.<\/p>\n\n\n\n

In the UK, Brexit has increased costs and difficulties of obtaining labour and of importing and exporting products. It has also had an indirect impact on exchanges rates, with the pound falling against the dollar substantially since 2016. But it is energy prices (mainly internationally priced in dollars) that are driving current inflation. Increasing wholesale gas and electricity prices are feeding into rising domestic and commercial energy bills. The cost of petrol has almost doubled in the UK since May 2020. These issues predate, but have been exacerbated by, the Russian invasion of Ukraine.<\/p>\n\n\n\n

Figure 1: Inflation (June 2012 to June 2022)<\/h4>\n\n\n
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