This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.
You can find the current article at its original source at https://www.theguardian.com/business/2017/sep/12/uk-cost-of-living-rise-imports-boost-inflation-interest-rates
The article has changed 5 times. There is an RSS feed of changes available.
| Version 1 | Version 2 |
|---|---|
| UK cost-of-living crisis grows as dearer imports push inflation to 2.9% | UK cost-of-living crisis grows as dearer imports push inflation to 2.9% |
| (about 1 month later) | |
| The squeeze on Britain’s living standards worsened last month after the increased cost of importing fuel, clothes and food pushed inflation back up to 2.9%, from 2.6% in July. | The squeeze on Britain’s living standards worsened last month after the increased cost of importing fuel, clothes and food pushed inflation back up to 2.9%, from 2.6% in July. |
| Women’s clothes were among the items to jump in price in August as the low value of the pound earlier this year pushed up the prices in sectors heavily dependent on imported goods. | Women’s clothes were among the items to jump in price in August as the low value of the pound earlier this year pushed up the prices in sectors heavily dependent on imported goods. |
| Labour and the Liberal Democrats said the spike in prices, equalling a four-year high in the consumer price index (CPI) reached in May this year, put pressure on Theresa May to immediately scrap the 1% pay cap for all public sector workers. | Labour and the Liberal Democrats said the spike in prices, equalling a four-year high in the consumer price index (CPI) reached in May this year, put pressure on Theresa May to immediately scrap the 1% pay cap for all public sector workers. |
| May’s government announced on Tuesday that it will give police officers a 2% pay rise and prison staff 1.7% this year, and lift the 1% cap for all public sector pay from next year. | May’s government announced on Tuesday that it will give police officers a 2% pay rise and prison staff 1.7% this year, and lift the 1% cap for all public sector pay from next year. |
| Liberal Democrat leader Vince Cable said a newly qualified nurse faced a real-terms pay cut of £412 this year under the cap with inflation at around 3%, while newly qualified teachers face a £435 shortfall. | Liberal Democrat leader Vince Cable said a newly qualified nurse faced a real-terms pay cut of £412 this year under the cap with inflation at around 3%, while newly qualified teachers face a £435 shortfall. |
| “Rising inflation shows how urgent it is to address the sense of unfairness around the pay cap,” he said.“With these numbers our nurses, teachers and other public sector workers will experience a 2% pay cut in the coming year. This will only aggravate the recruitment and retention crisis we are facing.” | “Rising inflation shows how urgent it is to address the sense of unfairness around the pay cap,” he said.“With these numbers our nurses, teachers and other public sector workers will experience a 2% pay cut in the coming year. This will only aggravate the recruitment and retention crisis we are facing.” |
| Speaking from the TUC’s annual conference in Liverpool, its general secretary, Frances O’Grady, said: “The government needs to get a grip and get pay rising across the economy. A good start would be to scrap the pay cap for all public sector workers.” | Speaking from the TUC’s annual conference in Liverpool, its general secretary, Frances O’Grady, said: “The government needs to get a grip and get pay rising across the economy. A good start would be to scrap the pay cap for all public sector workers.” |
| The latest pay figures are due on Wednesday and will be keenly watched after three months of rising wage growth to an annual rate of 2.1% in June. | The latest pay figures are due on Wednesday and will be keenly watched after three months of rising wage growth to an annual rate of 2.1% in June. |
| The Bank of England will give its verdict on the economy on Thursday, when it will judge how much the pay squeeze from below inflation wage rises is having on GDP growth. | The Bank of England will give its verdict on the economy on Thursday, when it will judge how much the pay squeeze from below inflation wage rises is having on GDP growth. |
| In its most recent state-of-the-nation report, Threadneedle Street’s monetary policy committee (MPC) said it expected inflation to plateau at around 3% before falling back while wages were forecast to maintain their current upward trajectory, possibly bringing to an end the recent fall in real incomes by the end of the year. | In its most recent state-of-the-nation report, Threadneedle Street’s monetary policy committee (MPC) said it expected inflation to plateau at around 3% before falling back while wages were forecast to maintain their current upward trajectory, possibly bringing to an end the recent fall in real incomes by the end of the year. |
| But the central bank could come under pressure to bring inflation down more quickly, leading some City traders to speculate that the MPC may be forced to raise interest rates sooner than forecast. An average of City analysts targets next August for the first rise in what by then would be 11 years. | But the central bank could come under pressure to bring inflation down more quickly, leading some City traders to speculate that the MPC may be forced to raise interest rates sooner than forecast. An average of City analysts targets next August for the first rise in what by then would be 11 years. |
| The expectation of an early rate rise pushed the pound to its highest level for a year against the dollar. | The expectation of an early rate rise pushed the pound to its highest level for a year against the dollar. |
| Sterling rose by just over a cent to hit $1.327 just after the figures were released. The pound was expected to remain at elevated levels until the central bank’s interest rate policy becomes clearer. | Sterling rose by just over a cent to hit $1.327 just after the figures were released. The pound was expected to remain at elevated levels until the central bank’s interest rate policy becomes clearer. |
| Inflation is when prices rise. Deflation is the opposite – price decreases over time – but inflation is far more common. | |
| If inflation is 10%, then a £50 pair of shoes will cost £55 in a year's time and £60.50 a year after that. | If inflation is 10%, then a £50 pair of shoes will cost £55 in a year's time and £60.50 a year after that. |
| Inflation eats away at the value of wages and savings – if you earn 10% on your savings but inflation is 10%, the real rate of interest on your pot is actually 0%. | |
| A relatively new phenomenon, inflation has become a real worry for governments since the 1960s. | A relatively new phenomenon, inflation has become a real worry for governments since the 1960s. |
| As a rule of thumb, times of high inflation are good for borrowers and bad for investors. | As a rule of thumb, times of high inflation are good for borrowers and bad for investors. |
| Mortgages are a good example of how borrowing can be advantageous – annual inflation of 10% over seven years halves the real value of a mortgage. | |
| On the other hand, pensioners, who depend on a fixed income, watch the value of their assets erode. | On the other hand, pensioners, who depend on a fixed income, watch the value of their assets erode. |
| The government's preferred measure of inflation, and the one the Bank of England takes into account when setting interest rates, is the consumer price index (CPI). | |
| The retail prices index (RPI) is often used in wage negotiations. | |
| Howard Archer, chief economic adviser at the EY Item Club, said: “Sterling’s past sharp drop should have now largely fed through the pricing chain. Meanwhile, ongoing muted earning growth and lacklustre economic activity should limit domestic inflationary price pressures. Additionally, oil prices remain relatively muted. | Howard Archer, chief economic adviser at the EY Item Club, said: “Sterling’s past sharp drop should have now largely fed through the pricing chain. Meanwhile, ongoing muted earning growth and lacklustre economic activity should limit domestic inflationary price pressures. Additionally, oil prices remain relatively muted. |
| “Consequently, we believe there is a strong chance that consumer price inflation will be back to 2% by the end of 2018.” | “Consequently, we believe there is a strong chance that consumer price inflation will be back to 2% by the end of 2018.” |
| The Office for National Statistics said much of the rise in inflation cold be attributed to the increasing cost of imports. | The Office for National Statistics said much of the rise in inflation cold be attributed to the increasing cost of imports. |
| Imports have risen steeply in price after the collapse in the pound following the Brexit vote, though the rising cost has taken longer to filter through to the high street than many analysts believed. | Imports have risen steeply in price after the collapse in the pound following the Brexit vote, though the rising cost has taken longer to filter through to the high street than many analysts believed. |
| Clothing and footwear, most of which is imported, jumped in price by 4.6% year on year after a sharp rise in the price of women’s clothing pushed the average price up by 2.4% between July and August. Fuel costs also rose with petrol prices jumping by 1.8 pence per litre. | Clothing and footwear, most of which is imported, jumped in price by 4.6% year on year after a sharp rise in the price of women’s clothing pushed the average price up by 2.4% between July and August. Fuel costs also rose with petrol prices jumping by 1.8 pence per litre. |
| The Resolution Foundation said that with the poorest fifth of households spending almost twice as much of their income on food and clothing as the richest fifth of households, its analysis shows that lower income families are seeing the fastest inflation increases. | The Resolution Foundation said that with the poorest fifth of households spending almost twice as much of their income on food and clothing as the richest fifth of households, its analysis shows that lower income families are seeing the fastest inflation increases. |
| Stephen Clarke, policy analyst at the thinktank, said: “The return of rising inflation after a two month pause will put further pressure on already stretched household budgets. | Stephen Clarke, policy analyst at the thinktank, said: “The return of rising inflation after a two month pause will put further pressure on already stretched household budgets. |
| “This time last year the falling cost of food and clothing provided crucial relief for low income families in particular. But the rising cost of imports has meant that they are now a leading driver of the rise in prices. | “This time last year the falling cost of food and clothing provided crucial relief for low income families in particular. But the rising cost of imports has meant that they are now a leading driver of the rise in prices. |
| “As a result, lower income households are now feeling the biggest living standards squeeze from rising inflation. This is particularly true of those low and middle income working families who are experiencing the combination of shrinking pay packets and the effects of their tax credits and universal credit being frozen in cash terms,” he said. | “As a result, lower income households are now feeling the biggest living standards squeeze from rising inflation. This is particularly true of those low and middle income working families who are experiencing the combination of shrinking pay packets and the effects of their tax credits and universal credit being frozen in cash terms,” he said. |