Inflation rate in Europe 2022: how July UK CPI compares to EU countries - including France and Germany

Boris Johnson’s government has repeatedly said the cost of living crisis is a ‘global issue’ - so how do inflation rates compare in other countries?

Inflation in the UK has reached yet another grim milestone, increasing to 10.1% in July 2022 according to Office for National Statistics data.

This figure marks another 40-year high, and is expected to rise even further to 13% in the coming months, the Bank of England forecasts

Before he was ousted in July, Boris Johnson’s administration repeatedly insisted cost of living crisis was the result of global inflationary pressure - a claim that’s subsequently been used in the Conservative Party leadership contest to defend the party’s economic track record.

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

NationalWorld has analysed the latest data from our closest neighbours to see if the UK’s inflation rate is on the par the government says it is.

The UK CPI rose 0.1% between December and January, meaning goods and services cost 5.5% more than they did a year ago (image: AFP/Getty Images)

What is the UK’s CPI rate?

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

The prices of everything from food, to clothing, to cars are included, with the basket weighted towards items that are most important to households.

UK inflation is sitting at near-30 year highs and household budgets aren’t keeping up (image: AFP/Getty Images)

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

Whilst being an important yardstick against which we can determine whether or not to alter our spending habits, the CPI is also used to set state pensions, benefits and statutory sick pay.

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

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This means the overall basket of goods cost 10.1% more than it did 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 in Europe in January 2022, we found it had seen one of the largest proportional year-on-year increases - with only Spain, Belgium and Ireland experiencing bigger leaps.

But as of July 2022, the UK is second only to the Netherlands.

The main difference between the UK and other nations has been energy bills.

The UK’s Ofgem energy price cap has proven to be highly inflationary, while some governments on the continent have been able to shield their citizens from the worst energy bill rises.

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The 54% increase to the Ofgem cap in April 2022 drove the UK CPI up by a massive two percentage points and briefly pushed its CPI above those of its closest European neighbours.

However, it should be noted that any halt to Russian energy imports would affect the UK negatively too, as the subsequent price shock would be seen on wholesale energy markets.

Boris Johnson has said his government is still considering cost of living support measures (image: Getty Images)

In terms of the latest July 2022 CPI, Spain (10.8%) and the Netherlands (10.3%) are the only major economies to be experiencing higher inflation than the UK (10.1%).

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

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

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Meanwhile, the Dutch have seen their inflation rate rise by a huge 1.7 percentage points between June and July.

The country’s official statistics organisation CBS says the rise was down to higher heating and power costs, which had risen by 108%, as well as pricier property lets.

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

It could mean Dutch inflation softens when August’s data is released.

While it also saw a similarly sized increase in food prices to the UK, Dutch fuel prices dropped month-on-month from €2.35 per litre to €2.21 as a result of a fuel duty cut.

Diesel has also fallen from €2.14 per litre to €2.07.

Not all of the other major European economies have experienced such big increases to their CPI inflation index.

France has seen a month-on-month rise of just 0.3 percentage points, while Germany and Italy have even seen month-on-month 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 decline in its CPI, according to its official statistics body Destatis.

While energy prices rose 35.7% and food prices (up 14.8%) outpaced the UK’s (12.6%), a €9 monthly ticket offer for unlimited travel on German public transport, as well as a one-off €300 energy bills discount has eased pressure on German households Destatis suggests.

In the case of Belgium, an important bit of context to note is that all wages in the country are tied to the CPI; so when inflation goes up, consumers lose no purchasing power.

Here in the UK, wages have fallen well behind the rate of inflation, according to the latest ONS figures.

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 Russia-Ukraine war, the recovery from Covid-19 and supply chain bottlenecks are all common themes behind inflation, with price rises being most acute in energy, food and transport.

Where the differences lie are in policy.

The Ofgem energy price cap has acted as a major contributor to inflation in the UK, while cost of living support has been more generous on the continent - although further financial aid is on its way for people in the UK later in 2022.

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

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

Liz Truss and Rishi Sunak travelled to Scotland for their latest Tory leadership hustings event. (Credit: PA)

The comparison with Europe also shows public spending can be increased without fuelling inflation - although some countries with high inflation rates, like Spain, might be showing where the limits of government intervention lie.

Ultimately, it all means that the UK’s next Prime Minister - be that Liz Truss or Rishi Sunak - will hold a lot of the levers that could determine where UK inflation goes next.

What complicates the situation is the recession that is forecasted to begin in the last three months of 2022.

The two leadership hopefuls have differing views on what to do.

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

Rishi Sunak wants to prioritise lowering inflation before introducing any major growth promotion measures.

How the victor walks this economic tightrope will determine how UK inflation changes from this winter onwards.