UK consumers facing squeeze as inflation stays above 2pc
UK inflation remained above the 2pc mark for a second month in a row in March, fuelling fears that the squeeze on households will continue.
Consumer prices last month increased by 2.3pc compared with the same month last year, according to Office for National Statistics data.
That's the same level as February, but economists expect inflation pressures to remain over the coming months. It has accelerated in recent months, pushed up in part by a weakening of the pound since last year's decision to leave the EU.
March marked the second month since December 2013 that inflation has surpassed the 2pc target favoured by Bank of England governor Mark Carney.
Nina Skero, economist with London-based Centre for Economics and Business Research, said all categories of goods and services made an upward contribution to the headline figure. "The release confirms our expectations that 2017 will see the end of the consumer spending boom which has driven economic growth in recent years," Ms Skero said. "With the prices of essentials such as housing costs, food and transport on the rise, less money will be left over for discretionary spending. This is especially true given that wage growth is unlikely to keep up with the elevated inflation levels."
With wages growing at the same rate or slightly slower than prices in the shops, many UK households are facing the prospect of a renewed squeeze on their incomes after a respite when inflation dipped to zero in 2015 and remained low last year.
"Based on the latest figures inflation already surpassed wage growth at the start of the year and labour market data out tomorrow are set to confirm that real wages are falling," Ms Skero added. Davy economist Conall Mac Coille said: "Despite the popular view that the UK economy has been left relatively unscathed by Brexit forecasts, consumers are subdued," he said. Confronted with the tough outlook for consumers, most Bank of England policymakers have signalled they see no urgency to raise interest rates, even as they predict inflation will peak at 2.8pc in around a year. (Additional reporting Bloomberg)