United Kingdom consumers facing squeeze as inflation stays above 2pc

Consumers Feel The Pinch With Christmas Around The Corner

Consumers Feel The Pinch With Christmas Around The Corner

The consumer price index, a key gauge of retail inflation, rose 0.9 per cent last month, the data showed, compared with a 0.8 per cent increase in February.

Salary increases excluding bonuses were 2.2 per cent higher between December and February compared to a year before - lower than yesterday's CPI inflation figure of 2.3 per cent.

Sterling hit its highest level in over a week against the US dollar after the figures as investors focused on a slightly stronger-than-expected rate of nominal pay growth.

Excluding volatile food and energy prices, the core CPI increased 2 percent in March from a year ago, nearly on par with the last reading.

The development adds further pressure to family budgets already being squeezed since the leap in inflation began last winter - largely caused by the effects of the weak pound in the wake of the Brexit vote.

Factory gate inflation "has eased", NBS analyst Sheng Guoqing said in a statement, noting that last month's figure fell back from a 7.8 per cent increase in February after five months of expansion.

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As neither energy prices nor sterling moved significantly during the month, current inflation levels remain their highest since September 2013. "However, this is offset by air fares, which fell slightly but a year ago rose substantially thanks to the timing of Easter", said Jonathan Athow of the ONS.

Tobacco, an item which consumers are prepared to pay high prices for to fuel their addictions, will also be shielded from inflation.

Also in April, increases in taxes on air passengers and auto owners are kicking in and many utility companies are raising their prices too.

A more timely unemployment measure of the March claimant count showed a fall of 25,500 to 765,400, the Office for National Statistics said, with the claimant count rate of 2.2% up from 2.1%.

Nina Skero, managing economist at the Centre for Economics and Business Research (Cebr), said households will increasingly feel the pinch as wage growth struggles to keep pace with inflation. The costs of garments, healthcare, housing and education, entertainment and transport rose remarkably.

The cost of living is expected to rise over the coming months, putting pressure on the Bank's Monetary Policy Committee (MPC) to hike interest rates beyond 0.25%. "That will only happen if wages start to grow strongly as we try to bolster our spending power and/or our expectations of future inflation start to rise to levels inconsistent with the target". "However, higher inflation, coupled with subdued earnings increases, means that the real growth rate in pay has tailed off to just above zero".

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