Inflation: Less triumphalism please, the cost of living crisis is far from over

Today's news on inflation is certainly welcome; but we're not on the home straights yet.

A degree of Tory triumphalism is in the air this morning on the back of the latest inflation figures. As expected, the rate of inflation has fallen, this time from 1.9 to 1.7 per cent – the lowest it’s been since 2009.

Make no mistake, this is excellent news. After three years of falling living standards the news that wages are finally starting to catch up with prices should be welcomed by everyone.

However it’s important to get a little perspective: wages are still catching up with inflation – they haven’t caught up. As Richard Campbell of the Office for National Statistics (ONS) told BBC News today:

“Prices are still going up, they are still going up by more than earnings so people will still continue to see some pressure… Although the rate of inflation has fallen, prices overall are still going up and people will still be feeling the pressure.”

As the graph demonstrates, month on month people are still getting poorer as inflation continues to outpace wage growth (albeit by a smaller margin than previously).

Before the chancellor uncorks the champagne, it’s also important to note that even when wages do eventually start to grow faster than inflation there is a lot of ground to make up. The effect of years of stagnant and falling wages has been cumulative – this is why on average people are in real terms ¬£1,600 a year worse off since 2010.

Today’s news is certainly welcome; but we’re not on the home straights yet.

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