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You can find the current article at its original source at https://www.theguardian.com/business/2018/sep/19/uk-households-face-squeeze-after-surprise-cpi-inflation-jump
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| UK households face squeeze after surprise inflation jump to 2.7% | UK households face squeeze after surprise inflation jump to 2.7% |
| (35 minutes later) | |
| UK inflation unexpectedly rose to the highest level in six months in August, pushed up by the rising cost of theatre tickets and high street shops launching their new-season autumn clothing ranges. | UK inflation unexpectedly rose to the highest level in six months in August, pushed up by the rising cost of theatre tickets and high street shops launching their new-season autumn clothing ranges. |
| The Office for National Statistics said the consumer price index (CPI) jumped to 2.7% last month from 2.5% in July, confounding economists’ forecasts for the rate to fall to 2.4%. | The Office for National Statistics said the consumer price index (CPI) jumped to 2.7% last month from 2.5% in July, confounding economists’ forecasts for the rate to fall to 2.4%. |
| The surprise increase will prove unwelcome for hard-pressed British households, which had finally begun to see wages rising above inflation earlier this year, following a protracted squeeze on living standards triggered by the Brexit vote. Workers’ pay rises are gradually increasing, although they remain perilously close to inflation. | |
| Inflation is when prices rise. Deflation is the opposite – price decreases over time – but inflation is far more common. | 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%. | 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. | 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 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. | The retail prices index (RPI) is often used in wage negotiations. |
| The latest labour market figures showed total pay including bonuses rose by 2.9% in the three months to July. Regular pay growth was 2.6%, suggesting real wages could be falling for many workers in Britain. | The latest labour market figures showed total pay including bonuses rose by 2.9% in the three months to July. Regular pay growth was 2.6%, suggesting real wages could be falling for many workers in Britain. |
| Mike Jakeman, senior economist at PwC, said: “A faster rate of inflation is likely to reduce the narrow gap between wages and inflation further, meaning that the rise in living standards for workers is likely to have been only marginal.” | Mike Jakeman, senior economist at PwC, said: “A faster rate of inflation is likely to reduce the narrow gap between wages and inflation further, meaning that the rise in living standards for workers is likely to have been only marginal.” |
| The ONS said the biggest contribution to the increased cost of living came from the rising price of recreation and culture, driven by higher ticket prices at the theatre and from the cost of new toys and computer games. Clothing launched by high street shops for the autumn season also had an impact, with the average price of clothing and footwear increasing by 3.1%. | The ONS said the biggest contribution to the increased cost of living came from the rising price of recreation and culture, driven by higher ticket prices at the theatre and from the cost of new toys and computer games. Clothing launched by high street shops for the autumn season also had an impact, with the average price of clothing and footwear increasing by 3.1%. |
| Although petrol prices continued to climb, rising by 1.4% between July and August, the rise was lower than a 1.8% increase experienced over the same period a year ago, providing a small downward contribution to the inflation rate. | Although petrol prices continued to climb, rising by 1.4% between July and August, the rise was lower than a 1.8% increase experienced over the same period a year ago, providing a small downward contribution to the inflation rate. |
| Some economist said the latest uptick for inflation could be temporary. Inflation has steadily declined this year as the impact from the post-EU referendum fall in sterling begins to fade. | Some economist said the latest uptick for inflation could be temporary. Inflation has steadily declined this year as the impact from the post-EU referendum fall in sterling begins to fade. |
| The Bank of England has, however, expressed concern that inflation remains above the 2% target set by the government, fuelling its decision to raise interest rates last month above the emergency level introduced after the financial crisis for the first time. | The Bank of England has, however, expressed concern that inflation remains above the 2% target set by the government, fuelling its decision to raise interest rates last month above the emergency level introduced after the financial crisis for the first time. |
| Inflation | Inflation |
| Economic policy | Economic policy |
| Economics | Economics |
| Retail industry | Retail industry |
| Pay | Pay |
| Interest rates | Interest rates |
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