British families suffering from severe stress It could be worse by this week when official inflation figures show how quickly the cost of living is rising. Economists expect Jump from 7% in March to 9.1% in April.
If the experts are right, the CPI will be at its highest level since 1990, when the UK was grappling with one of the worst post-war housing slumps and a full-blown recession.
This doesn’t mean families need to tell us – disposable incomes have been hit hard across the country. The price of unleaded petrol may have stabilized between £1.60 and £1.70 in the past month, but energy bills and food prices are skyrocketing.
James Knightley and James Smith, economists at ING, said the month-on-month rise would reflect a 54% jump in household gas and electricity bills since the start of April, after regulator Ofgem raised its energy price cap.
The Bank of EnglandIt forecast inflation rising to more than 10% after the summer, citing rising energy costs. “We are less confident that it will turn out to be this bad, but once again inflation has surprised by the continuing upward trend,” she said in a statement.
Labor market data will be released on Tuesday, a day before the inflation numbers.
What worries central bank officials the most Pay increases over the past few months About 5.4%, workers demand increases in their monthly earnings to keep pace with rising inflation over the next year. This is the harbinger that many fear a wage/price spiral that could drive inflation higher for years to come.
Some members of the Bank’s Monetary Policy Committee (MPC) believe that wage demands could rise — and that employers will have to raise prices to offset higher production costs — not only this year, but next, and possibly even 2024.
But at least two of the committee’s nine members indicated at their meeting earlier this month that they believed the opposite was true – that wage growth had already flattened.
However, Tony Wilson, director of the Institute for Employment Studies, believes that labor market tightness will keep wage growth strong. The UK has record levels of vacancies and an increasing proportion of employees moving in for jobs – making it difficult for employers to fill vacancies.
However, hundreds of thousands of companies operate at very low profit margins and know that their customers tighten their belts: this limits their scope to pay higher wages. These companies are more likely to cut production or reduce service level rather than raise prices.
“It is more likely that the restaurant will stop opening at lunchtimes rather than hire a second chef at much higher wages,” Wilson said.
Unemployment is expected to remain low, at 3.8% – the same as the previous month – although the figure is optimistic about the 500,000 workers, most of them over 50, who have left the labor market in the past 18 months.
Since 2019, the impact of Brexit has deprived employers of around 500,000 foreign nationals who were expected to become active in the UK labor market.
Wilson said the combined million workers gap was important when trying to explain the state of the UK job market compared to other economies of similar size. For example, in France, where the participation rate through the epidemic has remained the same, there is no loss of skilled workers and wages remain under control.
Wilson said the government should focus its efforts on helping those who have become economically inactive to return to work. Instead, the bank’s only policy action is over, as there is talk of higher interest rates to quell inflation when the Monetary Policy Committee meets in June and August.
But Paul Dills, chief UK economist at consultancy Capital economicsHe said his forecast that the base rate could rise from 1% to 3% now appeared to be in danger of being overly aggressive.
One of the dominant factors is the potential for a recession. The economy shrank 0.1% in March After a flat streak in February. The stagnation may already be fermenting.