UK cost of living crisis ‘comes to an end’ as inflation appears to be trailing wage growth
The cost-of-living crisis “appears to be coming to an end” as inflation appears poised to fall behind wage growth, an economist has said.
Capital Economics’ Ashley Webb forecast last month’s inflation figure, which stood at 7.9 percent in June, would “fall below” the pace of wage growth when official figures are released next week.
Wages rose about 6.9 percent on-year between March and May, not far from inflation.
Cost crisis: Capital Economics’ Ashley Webb predicts that inflation, which stood at 7.9% in June, would “fall below” the pace of wage growth when new official figures are released
But this is expected to reverse, with Capital Economics predicting that inflation will have fallen to 6.5 percent in July, while average earnings for the three months to June will accelerate to 7.4 percent.
Webb added that inflation was expected to remain below wage expansion for the rest of the year, meaning households would finally start to regain some purchasing power after almost a year of crippling price increases.
He said: ‘In general, based on the real growth rate of earnings, the cost of living crisis may end in July this year.
But levels of real disposable household income and real wages may not recover until 2025.’
The assessment came as Bank of England chief economist Huw Pill warned in a question-and-answer session hosted by Citizens Advice that food prices would remain high even if inflation starts to fall.
Traders also continue to quote more interest rate hikes from the Bank this year after it raised rates by 0.25 percentage point last week to 5.25 percent, its highest level in 15 years.
About two-thirds are betting on another 0.25 percent rise next month to 5.5 percent, while they are more split on the possibility of another November hike to 5.75 percent.
