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You can find the current article at its original source at https://www.theguardian.com/business/live/2017/jul/18/uk-inflation-cost-of-living-squeeze-pound-ftse-business-live
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| UK inflation rate drops to 2.6%, but wage squeeze continues - business live | |
| (35 minutes later) | |
| 10.29am BST | |
| 10:29 | |
| Here’s the Treasury’s comment on today’s inflation figures: | |
| ‘While it is encouraging that inflation was lower this month, we appreciate that some families are concerned about the cost of living. That’s why we have introduced the National Living Wage, which is helping to boost earnings by £1,400 a year, and why we’ve cut taxes for millions of people to help them keep more of what they earn. | |
| We are also increasing our free childcare offer to help 400,000 working parents.’ | |
| No mention of the public sector pay cap, though, which has caused public splits within Theresa May’s cabinet. | |
| 10.16am BST | |
| 10:16 | |
| The Unison union is also alarmed that wages are still being eroded by rising cost of living. | |
| UNISON assistant general secretary Christina McAnea says public sector workers deserve better: | |
| “With inflation much higher than wages, nurses, teaching assistants and care staff are getting poorer. | |
| “The government’s harsh approach to public sector pay is completely out of step with the public mood. | |
| “Every day the pay cap stays, public sector employees are leaving for better paid jobs elsewhere. And it gets that bit harder for the NHS, police forces, schools and town halls to recruit new staff. | |
| “The Chancellor should show he understands the financial struggles of millions of families and end the pay cap now.” | |
| 10.11am BST | 10.11am BST |
| 10:11 | 10:11 |
| Ben Brettell, senior economist at Hargreaves Lansdown, says the odds of a UK interest rate rise in August have shrunk. | Ben Brettell, senior economist at Hargreaves Lansdown, says the odds of a UK interest rate rise in August have shrunk. |
| He writes: | He writes: |
| UK inflation fell unexpectedly in June to 2.6%, easing the pressure on squeezed household budgets and substantially reducing the likelihood of an August interest rate rise. The ONS said the drop was largely due to falling motor fuel prices, although core inflation – which strips out the more volatile components such as fuel and food – also fell, to 2.4%. | UK inflation fell unexpectedly in June to 2.6%, easing the pressure on squeezed household budgets and substantially reducing the likelihood of an August interest rate rise. The ONS said the drop was largely due to falling motor fuel prices, although core inflation – which strips out the more volatile components such as fuel and food – also fell, to 2.4%. |
| The news sent the pound sharply lower as currency traders adjusted their outlook for interest rates. The Bank of England’s rhetoric has taken an increasingly hawkish tone in recent weeks, with Mark Carney himself saying at the end of last month that “some removal of monetary stimulus is likely to become necessary”. Chief economist Andy Haldane also indicated he might support a rate rise this year. However if today’s pullback in inflation marks the start of a sustained decline, the pressure on the Bank to raise rates will ease. | The news sent the pound sharply lower as currency traders adjusted their outlook for interest rates. The Bank of England’s rhetoric has taken an increasingly hawkish tone in recent weeks, with Mark Carney himself saying at the end of last month that “some removal of monetary stimulus is likely to become necessary”. Chief economist Andy Haldane also indicated he might support a rate rise this year. However if today’s pullback in inflation marks the start of a sustained decline, the pressure on the Bank to raise rates will ease. |
| 10.07am BST | 10.07am BST |
| 10:07 | 10:07 |
| You can read the inflation report online, here. | You can read the inflation report online, here. |
| 10.06am BST | 10.06am BST |
| 10:06 | 10:06 |
| Fidelity International: UK households are still suffering | Fidelity International: UK households are still suffering |
| This chart shows clearly how UK pay packets aren’t keeping up with the cost of living, despite June’s unexpected drop in inflation. | This chart shows clearly how UK pay packets aren’t keeping up with the cost of living, despite June’s unexpected drop in inflation. |
| It’s via Maike Currie, investment director for Personal Investing at Fidelity International. | It’s via Maike Currie, investment director for Personal Investing at Fidelity International. |
| She says there’s little to cheer in today’s inflation report: | She says there’s little to cheer in today’s inflation report: |
| “Today’s inflation numbers show CPI inflation rising from 0.5% in June 2016 to 2.6% a year later - that’s more than a five-fold increase in only a year. While inflation has eased back from May’s reading of 2.9%, thanks largely to a fall in the oil price driving down the cost of fuel, this will be cold comfort for Britain’s cash strapped consumers - inflation is still well above the Bank of England’s 2% target rate and outpacing our earnings. | “Today’s inflation numbers show CPI inflation rising from 0.5% in June 2016 to 2.6% a year later - that’s more than a five-fold increase in only a year. While inflation has eased back from May’s reading of 2.9%, thanks largely to a fall in the oil price driving down the cost of fuel, this will be cold comfort for Britain’s cash strapped consumers - inflation is still well above the Bank of England’s 2% target rate and outpacing our earnings. |
| “Last week’s wage growth figures show regular pay growing at just 2.0% for the three months to May, confirming that our pay packets aren’t keeping up with rising prices despite the UK’s unemployment rate reaching its lowest level since 1975. This is tightening the squeeze on UK households, which is bad news for an economy that relies on confident consumers spending on goods and services. Retail sales figures out on Thursday will provide a telling health check on just how spending is fairing given the mounting pressure on British households. | “Last week’s wage growth figures show regular pay growing at just 2.0% for the three months to May, confirming that our pay packets aren’t keeping up with rising prices despite the UK’s unemployment rate reaching its lowest level since 1975. This is tightening the squeeze on UK households, which is bad news for an economy that relies on confident consumers spending on goods and services. Retail sales figures out on Thursday will provide a telling health check on just how spending is fairing given the mounting pressure on British households. |
| 10.00am BST | 10.00am BST |
| 10:00 | 10:00 |
| No prizes for spotting the moment that the inflation data was released..... | No prizes for spotting the moment that the inflation data was released..... |
| Sterling slides a full cent to $1.3020 as UK inflation posts its biggest fall in over 2 years and throws a spanner in the rate hike works. pic.twitter.com/pSw7jizc1o | Sterling slides a full cent to $1.3020 as UK inflation posts its biggest fall in over 2 years and throws a spanner in the rate hike works. pic.twitter.com/pSw7jizc1o |
| 9.59am BST | 9.59am BST |
| 09:59 | 09:59 |
| Katie Schmuecker of the Joseph Rowntree Foundation says the inflation squeeze is hitting poorer Britons the hardest: | Katie Schmuecker of the Joseph Rowntree Foundation says the inflation squeeze is hitting poorer Britons the hardest: |
| Good news: inflation down a bit. Bad news: it's still 2.6% while benefits and tax credits are frozen. Result: squeeze at the bottom | Good news: inflation down a bit. Bad news: it's still 2.6% while benefits and tax credits are frozen. Result: squeeze at the bottom |
| 9.55am BST | 9.55am BST |
| 09:55 | 09:55 |
| TUC: Cost of living squeeze must be tackled | TUC: Cost of living squeeze must be tackled |
| TUC General Secretary Frances O’Grady isn’t celebrating the drop in inflation. | TUC General Secretary Frances O’Grady isn’t celebrating the drop in inflation. |
| She points out that Britons are still suffering from falling real wages, and urges the government to ditch its 1% cap on public sector pay rises. | She points out that Britons are still suffering from falling real wages, and urges the government to ditch its 1% cap on public sector pay rises. |
| O’Grady says: | O’Grady says: |
| “The government must stop this cost of living squeeze. Many working people are caught in a vice as rising prices crush their pay. | “The government must stop this cost of living squeeze. Many working people are caught in a vice as rising prices crush their pay. |
| “Ministers claim they are listening to struggling families. But now is the time to prove it. Britain needs a pay rise across the public and private sector.” | “Ministers claim they are listening to struggling families. But now is the time to prove it. Britain needs a pay rise across the public and private sector.” |
| 9.52am BST | 9.52am BST |
| 09:52 | 09:52 |
| UK inflation: snap reaction | UK inflation: snap reaction |
| ITV’s Robert Peston reckons that inflation has been dampened by the slowing UK economy: | ITV’s Robert Peston reckons that inflation has been dampened by the slowing UK economy: |
| Inflationary pressure in economy has been overstated, with headline rate down from 2.9% to 2.6%. Unsurprising given economic sluggishness | Inflationary pressure in economy has been overstated, with headline rate down from 2.9% to 2.6%. Unsurprising given economic sluggishness |
| This is the biggest drop in inflation in over two years, points out Jamie McGeever of Reuters: | This is the biggest drop in inflation in over two years, points out Jamie McGeever of Reuters: |
| UK inflation falls to 2.6% in June from 2.9% - the biggest decline in inflation since Feb. 2015. | UK inflation falls to 2.6% in June from 2.9% - the biggest decline in inflation since Feb. 2015. |
| Kevin Maguire of the Mirror points out that the retail prices index (another measure of inflation) hit 3.5% in June: | Kevin Maguire of the Mirror points out that the retail prices index (another measure of inflation) hit 3.5% in June: |
| Inflation 3.5% on RPI count(incl housing) used by pay negotiators so still nasty cut in value of most wages & living standards. CPI 2.6% | Inflation 3.5% on RPI count(incl housing) used by pay negotiators so still nasty cut in value of most wages & living standards. CPI 2.6% |
| 9.47am BST | 9.47am BST |
| 09:47 | 09:47 |
| Key charts: Why UK inflation has dropped to 2.6% | Key charts: Why UK inflation has dropped to 2.6% |
| This chart shows how the cost of transport, and recreation activities, both dropped last month: | This chart shows how the cost of transport, and recreation activities, both dropped last month: |
| Fuel prices fell by 1.1% between May and June 2017, the fourth successive month of price decreases. | Fuel prices fell by 1.1% between May and June 2017, the fourth successive month of price decreases. |
| There was also a 0.1% drop in recreation - which includes cultural services, and games, toys and hobbies. | There was also a 0.1% drop in recreation - which includes cultural services, and games, toys and hobbies. |
| However, as you can see, food, furniture and household goods all got more expensive during June. | However, as you can see, food, furniture and household goods all got more expensive during June. |
| And on an annual basis, almost everything is more expensive than a year ago: | And on an annual basis, almost everything is more expensive than a year ago: |
| 9.40am BST | 9.40am BST |
| 09:40 | 09:40 |
| The pound has fallen sharply since the inflation data was released, shedding all this morning’s gains. | The pound has fallen sharply since the inflation data was released, shedding all this morning’s gains. |
| Sterling has dropped to $1.3028, almost a cent lower. | Sterling has dropped to $1.3028, almost a cent lower. |
| City traders think there’s less chance of an early rise in UK interest rates. | City traders think there’s less chance of an early rise in UK interest rates. |
| Updated | Updated |
| at 10.06am BST | at 10.06am BST |
| 9.39am BST | 9.39am BST |
| 09:39 | 09:39 |
| This is the first time UK inflation has fallen since last October. | This is the first time UK inflation has fallen since last October. |
| This chart shows how the consumer prices index (in yellow) had rising pretty steadily since last summer: | This chart shows how the consumer prices index (in yellow) had rising pretty steadily since last summer: |