Friday, June 10 2022

In Britain, several disheartening economic news arrived this week: prices are rising at their fastest pace in 30 years, inflation-adjusted wages have fallen the most in almost eight years and the economy has barely progressed in February.

It increasingly shows what is proving to be a difficult year for many, with the biggest squeeze on household budgets expected since records began in 1956.

Even before Russia invaded Ukraine, Britain’s economic growth had slowed. But this war has weakened Britain’s economic prospects, as it has in many other countries. Rising energy costs affect household bills. Manufacturers, farmers and supermarkets have warned of rising costs of key inputs into their supply chain from goods produced in Russia and Ukraine, including metals, wheat, fertilizer and oil of sunflower. The pain is far-reaching: even fish and chips, a traditionally cheap British staple, has jumped in price.

The consumer price index rose 7% in March from the same period a year earlier, from 6.2% the previous month, the Office for National Statistics said on Wednesday. This exceeded economists’ forecasts. Inflation was driven higher by record gasoline and diesel prices, as well as strong increases in restaurants and hotels, food and beverages, and clothing and furniture.

This widespread increase in prices of commodities generally considered less volatile “will be viewed with particular unease by the Bank of England,” Sandra Horsfield, an economist at Investec, wrote in a note. The central bank has raised interest rates three times since December to pre-pandemic levels in a bid to halt price rises, even as policymakers have cut the outlook for economic growth.

The statistics agency also said on Wednesday that wholesale prices rose at their fastest pace since September 2008. Manufacturers’ output prices rose nearly 12% in March from a year earlier, while their input prices rose 19%, a record .

On Tuesday, data showed Britain’s unemployment rate fell to 3.8 per cent, back to its pre-pandemic low, amid a record number of job vacancies. Signs of a tight labor market are fueling expectations that workers will be able to demand higher wages. Salaries, excluding bonuses, rose 4% from December to February compared to the previous year, but for the moment the gains are being eaten away by inflation. When adjusted for price increases, wages fell 1%, the most since mid-2014.

The UK economy has recovered from its pandemic slump, but growth is running out of steam. After the Omicron wave subsided in February, bookings for accommodation and travel services increased, providing the main contributor to economic growth that month. The economy grew just 0.1% as manufacturing of cars, electrical goods and chemicals all fell, the statistics agency said on Monday.

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