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You can find the current article at its original source at https://www.theguardian.com/business/live/2017/jun/13/uk-inflation-hard-brexit-pound-sterling-ftse-business-live
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| Government urged to act on wage squeeze as UK inflation rate hits 2.9% – as it happened | Government urged to act on wage squeeze as UK inflation rate hits 2.9% – as it happened |
| (5 months later) | |
| That’s all for today, I think. | That’s all for today, I think. |
| Here’s our latest news story on the inflation data: | Here’s our latest news story on the inflation data: |
| Thanks for reading and commenting. GW | Thanks for reading and commenting. GW |
| Our economics editor, Larry Elliott, argues that the government must respond to the pickup in inflation, and reverse some of its austerity measures. | Our economics editor, Larry Elliott, argues that the government must respond to the pickup in inflation, and reverse some of its austerity measures. |
| He writes: | He writes: |
| Had Theresa May won the landslide she was clearly expecting, the government would have been able to ride out this difficult period. Inflation is likely to go up a bit further, but the ONS’s separate figures for producer output prices, which measure the cost of goods leaving factory gates and provide a guide to inflationary pressure early in the pipeline, appear to have peaked. Moreover, weaker consumer spending will result in lower growth and this will eventually feed through into a fall in inflation. | Had Theresa May won the landslide she was clearly expecting, the government would have been able to ride out this difficult period. Inflation is likely to go up a bit further, but the ONS’s separate figures for producer output prices, which measure the cost of goods leaving factory gates and provide a guide to inflationary pressure early in the pipeline, appear to have peaked. Moreover, weaker consumer spending will result in lower growth and this will eventually feed through into a fall in inflation. |
| But May is a weakened prime minister heading a minority administration and she doesn’t have time on her side. The government has recognised that voters are unhappy about falling living standards and have had enough of cuts. Deficit reduction will now play second fiddle to the need to raise real incomes, so expect a generous uplift in the minimum wage and an easing of curbs on public sector pay as signs that the age of austerity is over. | But May is a weakened prime minister heading a minority administration and she doesn’t have time on her side. The government has recognised that voters are unhappy about falling living standards and have had enough of cuts. Deficit reduction will now play second fiddle to the need to raise real incomes, so expect a generous uplift in the minimum wage and an easing of curbs on public sector pay as signs that the age of austerity is over. |
| More here: | More here: |
| Rising prices are bad news for those who have managed to save money, particularly if they’re relying on savings income (as many pensioners are). | Rising prices are bad news for those who have managed to save money, particularly if they’re relying on savings income (as many pensioners are). |
| M&S have calculated that the gap between the interest rate on cash savings and inflation is the widest since November 2011. | M&S have calculated that the gap between the interest rate on cash savings and inflation is the widest since November 2011. |
| That means savings, as well as wages, are shrinking in real terms. | That means savings, as well as wages, are shrinking in real terms. |
| Ritu Vohora, Investment Director at M&G, has the details: | Ritu Vohora, Investment Director at M&G, has the details: |
| “At this rate, £5,000 left in an average bank account would lose £137.50, in real terms after the effects of inflation, over the next 12 months. | “At this rate, £5,000 left in an average bank account would lose £137.50, in real terms after the effects of inflation, over the next 12 months. |
| “All investments come with some risk, but these rock bottom net savings rates carry the very real risk of eroding wealth.” | “All investments come with some risk, but these rock bottom net savings rates carry the very real risk of eroding wealth.” |
| “Now could be the right time to consider whether investing in stocks and shares could be a better way to protect against inflation, and achieve your long-term financial goals.” | “Now could be the right time to consider whether investing in stocks and shares could be a better way to protect against inflation, and achieve your long-term financial goals.” |
| The head of the Confederation of British Industry has called Thursday’s general election a political earthquake, but said it’s an opportunity for a different kind of Brexit in which the voice of common sense is heard. | The head of the Confederation of British Industry has called Thursday’s general election a political earthquake, but said it’s an opportunity for a different kind of Brexit in which the voice of common sense is heard. |
| Carolyn Fairbairn, director general of the CBI, also warned Theresa May that for businesses across the UK, particularly in Northern Ireland, a soft border in the country was fundamental. | Carolyn Fairbairn, director general of the CBI, also warned Theresa May that for businesses across the UK, particularly in Northern Ireland, a soft border in the country was fundamental. |
| “Clearly it was just a political earthquake last Thursday. What we saw and realised is a lot of the consensus we thought we had we actually don’t have,” Fairbairn told the Fortune Most Powerful Women International Summit in London on Tuesday. | “Clearly it was just a political earthquake last Thursday. What we saw and realised is a lot of the consensus we thought we had we actually don’t have,” Fairbairn told the Fortune Most Powerful Women International Summit in London on Tuesday. |
| “My biggest message is this is a time to broaden the church, listen to and work through the biggest issues. | “My biggest message is this is a time to broaden the church, listen to and work through the biggest issues. |
| “We know we really care about the strength of our economy, about the regions of the UK growing. Don’t just be focused on London. The young turned out in their thousands, listen to that young voice.” | “We know we really care about the strength of our economy, about the regions of the UK growing. Don’t just be focused on London. The young turned out in their thousands, listen to that young voice.” |
| Fairbairn said the soft border in Ireland was “absolutely fundamental”, because it had helped understanding between people and the peace process. “I’m hoping from a business and practically human point of view that there is a commitment to that,” she said. | Fairbairn said the soft border in Ireland was “absolutely fundamental”, because it had helped understanding between people and the peace process. “I’m hoping from a business and practically human point of view that there is a commitment to that,” she said. |
| She added that there was much unhelpful language around Brexit ahead of the commencement of negotiations next week, such as “hard and soft” Brexit. | She added that there was much unhelpful language around Brexit ahead of the commencement of negotiations next week, such as “hard and soft” Brexit. |
| “We know we want access to the single market, jobs depend on it. We also know there is a dilemma we’re facing, there is real public concern around immigration. We’re also seeing companies with skills shortages, a 96% reduction in nurses applying [as revealed yesterday]. | “We know we want access to the single market, jobs depend on it. We also know there is a dilemma we’re facing, there is real public concern around immigration. We’re also seeing companies with skills shortages, a 96% reduction in nurses applying [as revealed yesterday]. |
| We need to open up that dilemma again and come up with ways to address the public concern.” | We need to open up that dilemma again and come up with ways to address the public concern.” |
| Asked why businesses were quiet during the referendum campaign, Fairbairn said they weren’t but their voice wasn’t heard enough. “We learnt through the referendum how strong this sense of feeling left out of prosperity and growth a lot of the country felt,” she continued. “We didn’t understand enough the concerns around immigration.” | Asked why businesses were quiet during the referendum campaign, Fairbairn said they weren’t but their voice wasn’t heard enough. “We learnt through the referendum how strong this sense of feeling left out of prosperity and growth a lot of the country felt,” she continued. “We didn’t understand enough the concerns around immigration.” |
| What was needed now was “a reset”, she explained. “In terms of the migration issue, I think people were saying we want control back. Is that served by a single number, a cap? If not, let’s go back to problem solving.” | What was needed now was “a reset”, she explained. “In terms of the migration issue, I think people were saying we want control back. Is that served by a single number, a cap? If not, let’s go back to problem solving.” |
| “I’ve got a fundamental confidence in common sense prevailing through all this,” Fairbairn said. | “I’ve got a fundamental confidence in common sense prevailing through all this,” Fairbairn said. |
| “I think nobody in this room would think the referendum campaigns were good. The information and understanding... I think we can get to a better place now, where there are more voices coming through. Universities, young people. The chips are falling a different way now and we can have a different outcome. The fact is the EU will be our trading partner for a long time and it’s an opportunity to protect our relationship.” | “I think nobody in this room would think the referendum campaigns were good. The information and understanding... I think we can get to a better place now, where there are more voices coming through. Universities, young people. The chips are falling a different way now and we can have a different outcome. The fact is the EU will be our trading partner for a long time and it’s an opportunity to protect our relationship.” |
| But she added: “Let’s be very clear, everybody I speak to in business accepts Brexit is happening. But what we don’t have is a consensus about how it’s happening.” | But she added: “Let’s be very clear, everybody I speak to in business accepts Brexit is happening. But what we don’t have is a consensus about how it’s happening.” |
| She stressed that there was a lot of “really fantastic stuff” going on in businesses across the country, and urged people “not get too down on ourselves in terms of the economy”, which has huge potential. “But we’ve got to get Brexit right and make sure we have access to the single market.” | She stressed that there was a lot of “really fantastic stuff” going on in businesses across the country, and urged people “not get too down on ourselves in terms of the economy”, which has huge potential. “But we’ve got to get Brexit right and make sure we have access to the single market.” |
| While Britain faces the prospect of falling real wages, squeezed households and ongoing child poverty, America’s stock market has just hit a new all-time high. | While Britain faces the prospect of falling real wages, squeezed households and ongoing child poverty, America’s stock market has just hit a new all-time high. |
| The Dow Jones industrial average jumped by around 70 points to 21,307, a new record. | The Dow Jones industrial average jumped by around 70 points to 21,307, a new record. |
| Investment bank Goldman Sachs is the biggest riser (+1.5%), followed by credit card firm VISA (1.2%). | Investment bank Goldman Sachs is the biggest riser (+1.5%), followed by credit card firm VISA (1.2%). |
| Tech firms Apple, Microsoft and Cisco have all gained around 1%, after two days of losses. | Tech firms Apple, Microsoft and Cisco have all gained around 1%, after two days of losses. |
| BREAKING: Dow Jones Industrial Average hits new all-time high. https://t.co/0z9FK8VnYl pic.twitter.com/cjopE1e756 | BREAKING: Dow Jones Industrial Average hits new all-time high. https://t.co/0z9FK8VnYl pic.twitter.com/cjopE1e756 |
| UK government bond prices have hit their lowest levels in a month since the inflation data was released. | UK government bond prices have hit their lowest levels in a month since the inflation data was released. |
| The pound has also risen, now up 0.7 of a cent at $1.2720. | The pound has also risen, now up 0.7 of a cent at $1.2720. |
| Those two facts suggests that traders see a higher chance that the Bank of England tightens monetary policy sooner, because of the risk of inflation. | Those two facts suggests that traders see a higher chance that the Bank of England tightens monetary policy sooner, because of the risk of inflation. |
| However, several economists are suggesting that the BoE will be content to ‘look through’ the inflation figures. | However, several economists are suggesting that the BoE will be content to ‘look through’ the inflation figures. |
| The FTSE, meanwhile, is almost flat at 7519 points, up 0.1%. | The FTSE, meanwhile, is almost flat at 7519 points, up 0.1%. |
| FTSE 💯is up 0.01% at 7,512.93. LSE +6%. Convatec +2%. Johnson Matthey, Tesco, Fresnillo, Anglo American & Mediclinic +1%. 3i -2%.🇬🇧#UKshares | FTSE 💯is up 0.01% at 7,512.93. LSE +6%. Convatec +2%. Johnson Matthey, Tesco, Fresnillo, Anglo American & Mediclinic +1%. 3i -2%.🇬🇧#UKshares |
| Ashwin Kumar, Chief Economist at the Joseph Rowntree Foundation, has joined the ranks of the experts calling for the government to end its benefits freeze. | Ashwin Kumar, Chief Economist at the Joseph Rowntree Foundation, has joined the ranks of the experts calling for the government to end its benefits freeze. |
| He points out that the policy becomes particularly harsh when prices start to accelerate: | He points out that the policy becomes particularly harsh when prices start to accelerate: |
| “People on low incomes face challenging times. Inflation is up by the highest rate in five years, continuing a sharp rise since the Brexit vote, and employment figures out tomorrow are likely to show that wages are barely keeping up. With increases of 2 per cent in food, nearly 5 per cent in energy and 3 percent in clothing and footwear, families are facing very difficult choices. | “People on low incomes face challenging times. Inflation is up by the highest rate in five years, continuing a sharp rise since the Brexit vote, and employment figures out tomorrow are likely to show that wages are barely keeping up. With increases of 2 per cent in food, nearly 5 per cent in energy and 3 percent in clothing and footwear, families are facing very difficult choices. |
| “The benefit freeze will squeeze family budgets even further. This was a policy designed in an era of very low inflation. This is no longer the case and low-income households are suffering. As the cost of essentials rises, the new Government could help struggling families by ending the freeze on benefits.” | “The benefit freeze will squeeze family budgets even further. This was a policy designed in an era of very low inflation. This is no longer the case and low-income households are suffering. As the cost of essentials rises, the new Government could help struggling families by ending the freeze on benefits.” |
| Given the current economic uncertainty, Brits should plan for this wage squeeze to last for some time. | Given the current economic uncertainty, Brits should plan for this wage squeeze to last for some time. |
| Calum Bennie, savings expert at Scottish Friendly, says. | Calum Bennie, savings expert at Scottish Friendly, says. |
| “The seemingly perpetual squeeze on UK households continues. The rise of inflation to 2.9% means no end is in sight for hard-pressed consumers who see prices rising but growth in their wages failing to keep pace. It is no surprise then that consumers are reining back on spending or in many cases are turning to credit to get by as day-to-day living gets more expensive.” | “The seemingly perpetual squeeze on UK households continues. The rise of inflation to 2.9% means no end is in sight for hard-pressed consumers who see prices rising but growth in their wages failing to keep pace. It is no surprise then that consumers are reining back on spending or in many cases are turning to credit to get by as day-to-day living gets more expensive.” |
| “Prices will continue to rise due to the falling pound and the higher costs of imports so the message has to be try to be prudent with spending and stash more cash. You will need more bang for your buck in the next few months and having more money in your financial armoury can only help.” | “Prices will continue to rise due to the falling pound and the higher costs of imports so the message has to be try to be prudent with spending and stash more cash. You will need more bang for your buck in the next few months and having more money in your financial armoury can only help.” |
| Britain’s real pay crisis is a sign that austerity has failed, argues the GMB Union. | Britain’s real pay crisis is a sign that austerity has failed, argues the GMB Union. |
| Tim Roache, GMB general secretary, says Theresa May must take the opportunity to ditch polities such as the public sector pay freeze: | Tim Roache, GMB general secretary, says Theresa May must take the opportunity to ditch polities such as the public sector pay freeze: |
| “Yet again, we are seeing the cost of living rise faster than wages. Inflation has risen to almost ten times its rate 12 months ago. | “Yet again, we are seeing the cost of living rise faster than wages. Inflation has risen to almost ten times its rate 12 months ago. |
| In the real world, that increase means that no matter how hard people work, increasingly they are struggling to pay their bills. | In the real world, that increase means that no matter how hard people work, increasingly they are struggling to pay their bills. |
| “Too often there is more month than money left after pay day. | “Too often there is more month than money left after pay day. |
| “This is further proof, if any was needed, that austerity has failed and that it’s working people paying the price. | “This is further proof, if any was needed, that austerity has failed and that it’s working people paying the price. |
| “If the Prime Minister is to take anything away from her election embarrassment, it should be that people are fed up. | “If the Prime Minister is to take anything away from her election embarrassment, it should be that people are fed up. |
| “They’re fed up with working hard to stand still and with a system set up to benefit those who already have more than enough. | “They’re fed up with working hard to stand still and with a system set up to benefit those who already have more than enough. |
| “Ending the public sector pay freeze and making sure all workers are paid a decent wage is an absolutely must, and it needs to be on the agenda for the Queen’s Speech.” | “Ending the public sector pay freeze and making sure all workers are paid a decent wage is an absolutely must, and it needs to be on the agenda for the Queen’s Speech.” |
| A neat summary of today’s data: | A neat summary of today’s data: |
| Spot the problem. pic.twitter.com/3IxmppSnqW | Spot the problem. pic.twitter.com/3IxmppSnqW |
| House price inflation has also risen, thanks to a pick-up in prices in London. | House price inflation has also risen, thanks to a pick-up in prices in London. |
| The average house price rose by 5.6% in the 12 months to April, to £220,000. That’s up from 4.5% in the year to March 2017. | The average house price rose by 5.6% in the 12 months to April, to £220,000. That’s up from 4.5% in the year to March 2017. |
| The Office for National Statistics cautions that: | The Office for National Statistics cautions that: |
| While up against March 2017, there has been a general slowdown in the annual growth rate since mid-2016. | While up against March 2017, there has been a general slowdown in the annual growth rate since mid-2016. |
| #UK #house prices 🔼 5.6% in Apr & 1.6% vs Mar, average price now £220k, deceleration likely to continue https://t.co/iQdKI5JfCj pic.twitter.com/miAb0jUJg2 | #UK #house prices 🔼 5.6% in Apr & 1.6% vs Mar, average price now £220k, deceleration likely to continue https://t.co/iQdKI5JfCj pic.twitter.com/miAb0jUJg2 |
| London continues to be the region with the highest average house price at £483,000, followed by the South East (£315k) and the East of England, (£281k). | London continues to be the region with the highest average house price at £483,000, followed by the South East (£315k) and the East of England, (£281k). |
| The North East still has the lowest average price (123k). | The North East still has the lowest average price (123k). |
| In London, prices have risen by 4.7% in the last 12 months -- up from just 1.5% a month ago. | In London, prices have risen by 4.7% in the last 12 months -- up from just 1.5% a month ago. |