by UnHerd
Wednesday, 15
September 2021
Factcheck
14:00

Record inflation? Blame Eat Out to Help Out

The biggest contribution to the rise in CPI came from the hospitality sector
by UnHerd

According to figures released this morning, the annual rate of inflation (as measured by the Consumer Price Index) now stands at 3.2%.* Last month it was just 2.0%. The BBC is reporting this as a record-breaking increase “driven by higher food costs.”

This analysis is somewhat misleading, as it might suggest that increases in grocery prices are the key driver behind the inflation. That’s not the case. If you look at the Office for National Statistics breakdown of the inflation leap, the biggest factor is the “restaurants and hotels” category, closely followed by “recreation and culture”.

Contributions to change in the CPIH 12-month inflation rate, UK, between July and August 2021. Credit: ONS

In fact, restaurants and hotels have just made their largest ever contribution to the inflation figures — as can be seen in the purple bits of the following chart:

Contributions to the CPIH 12-month inflation rate, UK, August 2019 to August 2021. Credit: ONS

There’s a very good reason for that. In August 2020, which is the base month for the latest set of inflation figures, prices were artificially suppressed by the Government’s Eat Out to Help Out scheme, which provided a 50% discount on qualifying meals. 

This was a temporary measure, designed to revive a sector that had been stopped dead by lockdown. So comparing prices back then to prices to exactly twelve months later (which is how the year-on-year inflation figures are calculated) was bound to show a big increase in prices. 

In the jargon, this is called a “base effect” and it shouldn’t necessarily be taken as evidence that runaway inflation has taken control of the economy. 

So can we blame the record figures on Rishi Sunak and his now-infamous gimmick? Well according to the ONS, the CPIH inflation figures announced today would be lower — 2.7% instead of 3.0%. That’s significant, if not dramatic.

However, all the time that we’re calculating year-on-year inflation by comparing the recovery to the long months of lockdown and semi-lockdown, there’ll be all sorts of other base effects adding to the distortion of the figures. You can’t just stop an economy and start it up again without weird stuff showing up in the statistics. 

Ministers and journalists alike need to interpret these indicators with care. While inflation is always a risk that must be guarded against, so too is political panic. 

*Unlike the media, the ONS likes to lead with inflation figures that include owner occupiers’ housing costs (CPIH). These work out slightly lower than the CPI figures — 3.0% instead of 3.2%.

Join the discussion


  • Yes, we see a lot of increases this year in raw materials or manufactured products or services that we use in our business.
    They are not trivial increases , but in the range 5-20%.
    Lead times have gone up enormously too, and that , in effect, is a cost increase in time-critical operations, since you have to hold more inventory . And all operations are time-critical to some degree.
    All these rises are in the pipeline and yet to hit consumers but the media is obsessed with consumer retail and the entertainment industry as if that is the whole economy.
    I have to conclude that the main reason they don’t see all the things I have mentioned is that they are clueless,technically ignorant and incurious about the invisible stuff that holds their world together.

  • The inflation is 100% engineered. The stimulus checks, helecopter money, Fiscal Stimulus, is done to cause inflation. Monitary stimulus does not cause inflation (QE – that is done to keep interest zero and prop up asset prices), only Fiscal stimulus really causes inflation, and thus what is essentially UBI (Biden’s 4.5$ Trillion ‘Human Infrastructure) is pumped out to cause inflation.

    Money is borrowed into existence by the Fed/Treasury, and handed out to low income, and this inflates the Currency, creating Inflation,, harvesting the middle class savings to pay for it. All that waste, all the insane lockdown corruption and waste – the Middle class pay it back. But the thing is – it is going to destroy the economy, and that is also the plan. (CBDC is what is going on – it will have all kinds of unpleasant effects on us…)

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