You are here: Home - News -

Inflation hits four year high as households need to find an extra £790

by: Joanna Faith
  • 13/06/2017
  • 0
UK inflation jumped to a new four-year high of 2.9% in May, putting further pressure on financially squeezed households.

The consumer price index (CPI) rose from 2.7% the previous month, the Office for National Statistics said. Forecasters had predicted the rate to remain static in May.

Despite a fall in the price of motor fuels, higher prices for energy, food and recreational goods pushed the rate up.

This is the fourth consecutive month the inflation rate has exceeded the Bank of England’s 2% target.

The typical UK household will need to spend an extra £797 a year to maintain their standard of living enjoyed a year ago, according to Retirement Advantage.

Households are already feeling the pressure of rising prices and flat wage growth, with a report out yesterday from Visa showing spending fell for the first time in nearly four years in May.

 

Shrinking pay

Wage data out tomorrow is expected to confirm pay is shrinking in real terms, said Ben Brettell, senior economist at Hargreaves Lansdown.

High inflation is also bad news for savers as it erodes the real value of their cash.

According to Moneyfacts, not one of the 750 standard savings accounts on the market can outpace inflation.

The top-earning account from Atom Bank pays 2.3% and requires savers to tie their money up for five years. The best easy access account from Charter Savings Bank pays 1.11%.

Brettell said: “The general mood on the economy has become one of caution over the past few weeks, with first-quarter GDP figures disappointing, consumer spending looking weaker and Brexit-related uncertainty looming large.

“However, growth is expected to pick up somewhat in the second quarter, and it looks like the election result could make for a ‘softer’ Brexit, which could prove positive for the economy.”

He added: “Bank of England policymakers had previously said they expect inflation to peak at a little below 3% in the fourth quarter, but the evidence so far points to a sharper rise than anticipated. Just one member of the MPC, Kristin Forbes, has been voting for higher interest rates, and she leaves the committee next month.

“The balance of probability suggests the Bank will continue to ‘look through’ higher inflation and leave rates on hold to support the economy, but if inflation continues to surprise we could start to see members revising their positions.”

There are 0 Comment(s)

You may also be interested in

Business Skills

In this section, we offer short ‘how to’ guides on harder to crack areas of business. From social media, to regulation or niche product areas, we cover it all.

Profiles

Our journalists interview key industry entrepreneurs, strategists and commentators for day-to-day market insight and a strategic view of where the industry is heading. We offer lessons for success and explore the opportunities for your business

Success in Practice

Here, we share case studies fleshing out best practice to help you decide what could work for your business. Take a look at how others approached complex tasks like launching a new mortgage lender, advising on a new product area or deciding to specialise in another. Learn from others mistakes and triumphs.

Marketwatch

Each week, we ask top mortgage and property commentators with a unique perspective to examine a key news headline, market move or regulatory or political issue.

Poll

Vote in our weekly poll here. It’s your chance to tell us what you think and be heard on the top news stories of the week. Review our archive to find out what your industry really thinks and all our coverage of the results.

Top Comments

Be part of the conversation on Mortgage Solutions. We want to hear from you. We have a tool called Disqus to tell us which stories get the most comments each week. Every Friday, the team picks the most thoughtful or opinionated contributions from our readers to enjoy again. Don’t forget to share your favourite stories from the site on social media to keep the conversation going.

Read previous post:
The Legal and General Mortgage Club Awards in pictures

Legal and General Mortgage Club celebrated the success of its members at a champagne and lunch awards ceremony at the...

Close