UK Inflation Rise To 1.8% Delays Real Wage Rise Hopes

Inflation rose for the first time in 10 months in April, dashing hopes that the recovering economy could finally see wages start to rise in real terms, official figures show.

The Consumer Prices Index (CPI) measure of inflation rose to 1.8% after hitting a four-year low of 1.6% the previous month, the Office for National Statistics (ONS) said.

This means that, with annual wage rises stuck at 1.7%, inflation is still eating at pay rises for Britons. Chancellor George Osborne welcomed the sudden rise, breaking the recent trend of falling inflation, as “welcome news for families”.

Jeremy Cook, chief economist at the currency company, World First, said: “This figure is slightly higher than expected, and the core reading is the highest it has been in 8 months.

“Inflation remains below target as it stands at the moment, but April’s increase has seen inflation back to outstripping wages. Mark Carney, said at the weekend that the Bank of England hopes that wages will accelerate soon, as productivity increases, and we will see a near-term lull in inflation.”

A hoped-for acceleration in real-term wages would provide a boost for the Coalition amid Labour claims that the recovery has yet to improve the lives of ordinary voters, but the new figures suggest that this has yet to happen.

A separate measure of inflation, the Retail Prices Index (RPI), which includes housing costs, was unchanged at 2.5%.

CPIH, a new measure which also includes housing costs, rose to 1.6%, up from 1.5% in March. Another new measure, RPIJ, was unchanged at 1.8%.

A Treasury spokesman said: “The latest figures show that inflation remains below the target rate and well below half of the peak in September 2011.

“Lower inflation and rising job numbers show that the Government’s long-term plan is working and Britain is coming back. The biggest risk to economic security would be abandoning the plan that is creating a brighter economic future.”

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  • Your pay won’t be back to normal for years

    As NIESR director Jonathan Portes told BBC Radio 4’s Today programme: “Real wages – take-home pay deflated by inflation – is about 6% lower than it was then and won’t get back to its previous 2008 peak before, we reckon, another three or four years.”

  • You’re still worse off than back in 2008

    Portes said: “What really matters is how rich we are – per capita GDP – and that’s well below the level of 2008 and won’t get back to its previous level for a couple of years.”

    As the picture for GDP per capita, charting individual output per person, Britain is lagging behind France, Germany, Japan and the US and is nowhere near where it was back in 2008.

  • Only people with bonuses are enjoying rising pay packets

    Britons’ pay packets were 1.7% higher in the year to February, compared to the latest CPI inflation rate of 1.6%, however <a href=”” target=”_blank”>if you strip out bonuses, the pay growth falls to a below-inflation rate of 1.4%.</a>

  • Britons are getting more in debt

    Despite Osborne promising that “we’re getting on top of our debts”, the <a href=”” target=”_blank”>OBR predicts that household debt is set to take an be even bigger than expected as compared to workers’ pay packets.</a>

  • The country’s own debt is still rising

    Osborne pledged to ensure that debt was falling by 2015-2016 in his first budget, but <a href=”” target=”_blank”>now is set to see debt only start to fall by 2016-2017 as it soars further and further past £1 trillion</a>

  • Osborne will keep struggling to get us exporting

    Despite Osborne warning in his Budget that he wants businesses to export more, the OBR predicts that the UK’s exports will still fail to make a net contribution to the country’s growth.

    It said: “Net trade is expected to make little contribution to growth over the remainder of the forecast period, reflecting the weakness of export market growth and a gradual decline in export market share.”

  • Osborne borrowed more in 3 years than Labour in 13

    Osborne’s austerity message was <a href=”” target=”_blank”>brutally undermined last November when the Office for National Statistics</a> found that the coalition had borrowed £430.072 billion since it took over, whereas the last Labour government managed to borrow just £429.975 billion.

  • And America recovered ages ago…

    We may have reached our pre-recession peak, but the US, which focused on growth as well as deficit reduction, is already 6.3% above where it was in 2008.

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20 May 2014 | 10:21 am – Source:

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