As wages fall behind, families told to expect price increases


Families are encouraged to brace for another financial squeeze as official numbers issued this Tuesday are set to show inflation is rising again.

Price increases stalled in June and lower petrol prices suppressed inflation. But economists think pressures are rising once again, predicting inflation rose from 2.6 percent in June to 2.7 percent in the 12 months to July – and the rise in costs is seen to last.

The growing cost of foreign holidays due to the decline in the pound is a factor as is food inflation.

“We view [June’s dip] as a temporary pause in the upwards trend, rather than the beginning of a downwards glide-path for inflation,” stated Alan Clarke, an economist at Scotiabank, who estimates inflation of 2.8pc in July.

He assumes prices will rise again over the year: “The peak in inflation is yet to be reached. Indeed, the Bank of England’s updated projection sees consumer price inflation reaching a peak of 3 percent year on year in October. While our forecast is fractionally higher than the Bank’s, we appear to be in good company.”

Economists likewise do not expect to see any indications of wage growth in June, estimating a rise of 1.8 percent in numbers out on Wednesday – meaning earnings are dropping further behind prices.

However, economists anticipate employment to keep on climbing as businesses continue hiring workers. On average they expect an 85,000 increase in employment with the non-employment rate staying at 4.5 percent, the lowest since 1975.