Price increases are outstripping wage growth
Economists and trade unions have warned that consumers are facing a significant squeeze on their incomes, as the ONS published figures showing that inflation continued to surpass the Bank of England’s targets in March.
Consumer price inflation has remained at 2.3 per cent in March, remaining at its highest year-on-year level since October 2013. The ONS warns that ‘food, drink and clothing prices all rose in March’, but were offset by relatively low airfares, since Easter this year falls in April rather than March.
As inflation outpaces wage growth, people’s incomes are taking a hit.
‘Rising prices and sluggish pay increases mean that real earnings growth has now ground to a halt,’ warned TUC general secretary Frances O’Grady.
“Without government action, another living standards crisis is on the cards. We urgently need more investment in skills and infrastructure to build strong foundations for better paid jobs. And it’s time to scrap the pay restrictions hitting midwives, teachers and other public servants.”
The looming inflationary squeeze will force consumers to pay more for their food and fuel, and will discourage saving, which is already worryingly low, with reports that a third of working families are a paycheck away from losing their homes.
The Treasury claims its working to build the fabled ‘economy that works for everyone’ by freezing fuel duties, increasing the national living wage and cutting income taxes. But without earnings growth consumers will inevitable change their spending habits, with potentially severe knock-on effects for the economy at large.
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