Data set to expose Brexit inflation
Evidence of price rises and wage growth in the UK tomorrow (Tuesday) is expected to reinforce the growing pressures on household budgets as the slump in the pound since the June 23 referendum vote continues to boost inflation.
The Bank of England has warned that the economy’s principal driver of growth, consumer spending, will lose momentum during 2017 as rising living costs eat into family budgets. Economists expect government data on Tuesday will vindicate the fears, with inflation forecast to have reached its highest level for more than three years in March.
The consumer prices index (CPI) measure of inflation is forecast to be 2.3 per cent for the second month running, according to a Reuters poll of economists. There are also
Labour market figures due on Wednesday to offer new insights into whether looming Brexit negotiations have started to affect hiring decisions and will suggest whether pay growth is keeping pace with inflation, or if incomes are relatively falling.
Economists forecast average pay growth slipped to 2.2 per cent in the three months to February.
“Worrying for UK growth prospects, the fundamentals for consumers look odds-on to weaken markedly further over the coming months as rising inflation eats further into purchasing power with the squeeze reinforced by muted earnings growth,” said Howard Archer of the consultancy IHS Markit.
“We expect inflation to reach 3 per cent before the end of 2017 and it could well rise further, to a peak around 3.3 per cent, in the early months of 2018.”
The sharp fall in the pound since the referendum last summer has raised the price of imported goods such as fuels, metal and ingredients. Doritos, Peperami and Coco Pops are the latest products to be affected by “shrinkflation”, where products have shrunk in size but prices have remained unchanged.
On a more positive note, it is forecast that Britain will be able to increase its exports to India by more than £2 billion per year after Brexit by cutting EU red tape, a report suggests.
The UK currently faces tariffs on its trade with India because of the failure to agree a free trade deal with the EU.
The deal has been held up by Brussels’ regulations on intellectual property and data protection. New Delhi is refusing to comply with the demands.
London, according to the Daily Telegraph, regards the disputed EU rules as unnecessary.
A report from the Commonwealth, whose 52 nations include India and Britain, says that Brexit presents a significant “opportunity”.
The report said: “Given the slow pace of negotiations over [a trade deal] with the EU, Brexit provides a fresh opportunity to India to strengthen its economic relationship with the UK through an India–UK trade and investment agreement.”
Picture credit: Flickr
