Wage packets fail to keep pace with rise in cost of living
Published 17/04/2013 | 04:20
The cost of living is still rising more than twice as fast as wage packets but there is some light at the end of the tunnel for beleaguered households.
Official figures showed Consumer Prices Index inflation stuck stubbornly at 2.8% in March as soaring car insurance premiums cancelled out falling food and drink prices.
Salaries rose by just 1.2% on average.
Analysts expect inflation to bust the 3% mark in the months ahead, as higher water bills kick in and the impact of the pound's fall this year feed through to the high street.
But the UK's big four supermarkets rushed to cut at least 2p off petrol prices this week and economists say better news may be on the way from falling oil prices, caught up in a global commodity rout triggered by weak Chinese growth figures.
Capital Economics' Samuel Tombs said: "Rising food prices and the approaching anniversary of a period of sharp discounting on the high street mean that the headline rate could climb to a peak of about 3.5% over the next few months.
"But the recent fall in oil prices to below $100 a barrel for the first time since last July has brightened the inflation outlook beyond that."
Angela McGowan, economist at Danske Bank, said the Bank of England will be watching the figures closely.
"Although the Bank of England's remit was changed in the budget last month, it will still focus on inflation targeting. However, the Bank has now been given leeway to adopt targets for growth and employment – a de facto dual mandate," she said.
"While the latest numbers indicate that the UK will most probably avoid a triple-dip recession in Quarter 1, the extremely weak growth in the UK suggests that Bank of England will probably opt for more monetary stimulus in the months ahead regardless of the elevated level of inflation."