Member Article

Inflation unchanged in March

Inflation remained at 2.8% in March, its highest level since May last year, according to the Office for National Statistics.

Large upward pressures came from the recreation and culture sector, caused by price rises for audio-visual equipment, books, newspapers and stationery.

Downward pressures came from furniture and furnishing, motor fuels and meat.

In a separate set of data, the ONS revealed the produce price index rose 2%, compared with a rise of 2.3% in the year to February.

PwC highlighted that inflation is running at twice the rate of earnings, leading to falling household living standards.

Partner at PwC Newcastle, Jonathan Greenaway, said: “Consumer spending is a key driver of economic activity and the current imbalance between inflation and wages means the average household income is contracting steadily, month on month.

“With rock bottom interest rates, savers and those reliant on income from savings and investments are equally badly off.

“We’ve seen some recent easing in petrol and diesel prices and a fall in global commodity prices, but these have been particularly volatile in recent years, and most recently affected by uncertainty about the health of the Chinese economy, and could reverse just as quickly.

“Our view is that CPI could well increase above 3% in the coming months, driven by pressure on food prices, utility bills and the effect of sterling’s sharp fall earlier this year.

“That means hitting the Bank of England’s 2% target will be protracted and painful, particularly if the Monetary Policy Committee opts for more quantitative easing (QE), which most economists accept is a driver of inflation.”

This was posted in Bdaily's Members' News section by Tom Keighley .