THE dip in annual UK inflation in June should not be taken as any kind of sign at all that the intense pressure on households, in the wake of the Brexit vote, is easing.
Inflation, which has surged on the back of sterling’s post-Brexit vote woes as import costs have risen, will remain elevated in coming months. It will likely head back up again, against a backdrop of surging prices for food, furniture, and household goods.
And let us not lose sight of the fact that annual UK consumer prices index inflation in June, at 2.6 per cent, is nearly nine times the 0.3 per cent rate recorded for May last year, ahead of the Brexit vote. So households are still much worse off, even if the inflation rate has dipped from 2.9 per cent in May.
Crucially, annual CPI inflation remains well above modest growth in nominal pay. So already hard-pressed households are having to deal with a renewed fall in pay in real terms – one that looks set to continue for a while.
The pressure on household finances is also evident in the latest figures from the Scottish Retail Consortium today. These show the value of Scottish retail sales in June was down 0.5 per cent on the same month of last year.
Ewan MacDonald-Russell, head of policy and external affairs at the SRC, concluded it had been “a disappointing June for retailers as nervous customers continue to postpone discretionary spending due to squeezed household incomes and worries about the economy”.
A new survey from pensions company Aegon UK shows four in five people are now concerned they will no longer be able to maintain their current lifestyle,
While the dip in inflation in June might make the Bank of England a bit less likely to raise UK base rates from their record low of 0.25 per cent in the near term, the big, post-Brexit vote picture for the vast bulk of households remains exactly the same.
The consumer squeeze continues to intensify. That is bad news for an already struggling UK economy.
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