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| Poor households hit hard as UK inflation sticks at five-year high - business live | |
| (35 minutes later) | |
| The jump in food and drink prices are a particularly blow for the poorest in society (as everyone has to eat). | |
| So even if inflation peaks soon, the cost of living squeeze could continue for a while. | |
| Yael Selfin, chief economist at KPMG, explains: | |
| “With monthly inflation gradually moderating, households will be relieved that the UK may have now reached the peak in year-on-year price rises. | |
| However, the overall figures mask significant increases in the price of basic necessities such as fruit and vegetables, which are most likely to hit those already struggling to cope with the squeeze on real incomes due to the high inflation. | |
| Labour MP Chuka Umunna says the “ongoing Brexit chaos” is hitting people in their pockets. | |
| “Not only is inflation continuing to run well above the Bank of England’s target, at 3%, but the inflation rate for food and drink has increased to 4.1%, the highest since September 2013. | |
| “People are feeling the Brexit squeeze as real wages contract and everyday items become more and more expensive. Nobody voted in the referendum to make themselves poorer, so people have every right to look at the impact Brexit is having on their finances and ask themselves whether the realities of Brexit match up with what they were promised. If not, everyone has the right to change their mind. | |
| On one level, today’s inflation reading is a relief to the Bank of England. | |
| The BoE is responsible for maintaining price stability. So governor Mark Carney won’t have to write a letter explaining why CPI has deviated more than 1 percentage point away from the 2% target. | |
| But.... the Bank expected inflation to push over 3% this autumn, when it raised interest rates from 0.25% to 0.5% two weeks ago. | |
| If inflation isn’t as strong as feared, has the Bank blundered by hiking borrowing costs, at a time when consumers are cautious and economic growth is slow? | |
| So UK inflation still at 5 year high but has it reached its peak?begs question were interest rates raised too soon given economic weakness? | |
| Inflation is measured across a number of areas. And this chart neatly shows how transport (yellow) and food (blue) have driven inflation higher this year. | |
| Food and transport (fuels) important drivers of change in #inflation rate over last 2 years pic.twitter.com/AUfJstQN8o | |
| In 2016, they both pulled the cost of living down (as you can see, they’ve below zero), but this year they have both become significant contributors. | |
| Alistair Wilson, Head of Retail Platform Strategy at Zurich, sees some light at the end of the living squeeze tunnel: | |
| “Higher inflation is creating a living standards headache for families as prices continue to rise faster than their pay packets. | |
| However, there are signs that the worst of the squeeze on family finances may be coming to an end with British workers set for the biggest pay rises since before the financial crisis, likely to increase by between 2.5% and 3.5% next year. | |
| At 3%, Britain’s inflation rate is outstripping pay rises - -which only rose by 2.1% over the last year. | At 3%, Britain’s inflation rate is outstripping pay rises - -which only rose by 2.1% over the last year. |
| TUC General Secretary Frances O’Grady says the government needs to take action -- and next week’s budget is the perfect opportunity. | TUC General Secretary Frances O’Grady says the government needs to take action -- and next week’s budget is the perfect opportunity. |
| “The government must stop turning a blind eye to Britain’s cost of living crisis. Household budgets are being stretched to breaking point. | “The government must stop turning a blind eye to Britain’s cost of living crisis. Household budgets are being stretched to breaking point. |
| “Wages will continue to lag behind inflation unless the Chancellor acts. | “Wages will continue to lag behind inflation unless the Chancellor acts. |
| “Next week’s Budget is a chance to give five million public sector workers the pay rise they are long overdue. And its a chance to invest in the kind of high-skilled jobs people can live on.” | “Next week’s Budget is a chance to give five million public sector workers the pay rise they are long overdue. And its a chance to invest in the kind of high-skilled jobs people can live on.” |
| Housing and household service costs made the biggest contribution to Britain’s inflation last month. | Housing and household service costs made the biggest contribution to Britain’s inflation last month. |
| That’s due to electricity price rises, and increases in council tax over the last couple of years. | That’s due to electricity price rises, and increases in council tax over the last couple of years. |
| Food was another key factor (as explained earlier), along with transport costs (even though fuel prices have dipped recently) | Food was another key factor (as explained earlier), along with transport costs (even though fuel prices have dipped recently) |
| The jump in inflation over recent months is clearly a blow to UK consumers, even though October’s reading isn’t as bad as feared. | The jump in inflation over recent months is clearly a blow to UK consumers, even though October’s reading isn’t as bad as feared. |
| Thomas Wells, manager of the Smith & Williamson Global Inflation-Linked Bond Fund, says households are still suffering the aftermath of the 2016 Brexit vote: | Thomas Wells, manager of the Smith & Williamson Global Inflation-Linked Bond Fund, says households are still suffering the aftermath of the 2016 Brexit vote: |
| “UK inflation remains elevated, in line with our expectations. We continue to view the post-referendum weakness in sterling as the key driver of the recent spike in inflation, putting pressure on household budgets. | “UK inflation remains elevated, in line with our expectations. We continue to view the post-referendum weakness in sterling as the key driver of the recent spike in inflation, putting pressure on household budgets. |
| “This is unquestionably bad for consumers, especially when combined with the recent increase in interest rates pushing up mortgage repayments. We therefore expect conditions to remain tough, putting downward pressure on demand, and hence inflation, over the next six months. | “This is unquestionably bad for consumers, especially when combined with the recent increase in interest rates pushing up mortgage repayments. We therefore expect conditions to remain tough, putting downward pressure on demand, and hence inflation, over the next six months. |
| The cost of food and non-alcoholic beverages rocketed by 4.1% over the last 12 months -- helping to keep overall inflation high. | The cost of food and non-alcoholic beverages rocketed by 4.1% over the last 12 months -- helping to keep overall inflation high. |
| Here’s a chart showing how UK inflation is running at a five-year high this autumn: | Here’s a chart showing how UK inflation is running at a five-year high this autumn: |
| Breaking! Britain’s inflation rate has stuck at 3.0% in October, matching September’s five-year high. | Breaking! Britain’s inflation rate has stuck at 3.0% in October, matching September’s five-year high. |
| That means there’s no let-up in the cost of living squeeze hitting UK households. | That means there’s no let-up in the cost of living squeeze hitting UK households. |
| On the upside, City economists had feared the consumer prices index would have risen even higher, to 3.1%. | On the upside, City economists had feared the consumer prices index would have risen even higher, to 3.1%. |
| More to follow! | More to follow! |
| Here we go.... | Here we go.... |
| Stand by your desks! UK inflation and house price data and PPI is due in a minute or so #CPI | Stand by your desks! UK inflation and house price data and PPI is due in a minute or so #CPI |
| Italians didn’t have much to cheer about during last night’s football. But this morning’s economic data is a whole new ball game! | Italians didn’t have much to cheer about during last night’s football. But this morning’s economic data is a whole new ball game! |
| Italy’s economy expanded by 0.5% in the third quarter of this year, ahead of expectations for a 0.4% rise. | Italy’s economy expanded by 0.5% in the third quarter of this year, ahead of expectations for a 0.4% rise. |
| That matches France’s performance, and is slightly faster than the UK. | That matches France’s performance, and is slightly faster than the UK. |
| After several sluggish years, Italy’s economy does seem to have shifted up a gear in the last few quarters: | After several sluggish years, Italy’s economy does seem to have shifted up a gear in the last few quarters: |
| Italy will miss the World Cup but clearly isn't missing the #euroboom. https://t.co/gVI7pMsko4 pic.twitter.com/nAGeKO01Yf | Italy will miss the World Cup but clearly isn't missing the #euroboom. https://t.co/gVI7pMsko4 pic.twitter.com/nAGeKO01Yf |
| *ITALIAN ECONOMY EXPANDED 1.8% IN 3Q Y/Y; EST. 1.7% GROWTH | *ITALIAN ECONOMY EXPANDED 1.8% IN 3Q Y/Y; EST. 1.7% GROWTH |