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Inflation falls again

15 April 2014

Wages in the private sector are now rising faster than inflation. The latest CPI inflation figures show that it now down to 1.6 per cent, comfortably below the Bank of England’s 2 per cent target. This is the sixth time in a row where inflation has fallen. An interest rate rise this side of the election is becoming ever more unlikely.

Tomorrow, the Office for National Statistics provides it figures for average wage growth in the last three month. This is expected to show that wages are now increasing faster than prices, easing the cost of living squeeze. Labour argues that the cost of living crisis is about far more than this. But there’s no doubt that if this trend continues between now and May 2015, people will feel better off on polling day than they do today.

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UPDATE FROM FRASER: The earnings recovery has begun, but it’s expected to be slow (which partly explains the rise in job numbers – folk are still being paid significantly less than before the crash). The below graph, using OBR forecasts, shows just how long it will be before the average Brit is as well-paid as before the crash:-

Screen Shot 2014-04-15 at 12.56.21

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Show comments
  • Greenslime

    Oh dear. Poor Ed. What simplistic mantra will he move on to now? Nothing positive I hope. We wouldn’t want to see a change of direction at this late stage, would we.

  • ohforheavensake

    Kind of missing the point: inflation (and the inflation target) is if anything a little too low. If the BoE raised their target to 4% they’d have more flexibility when it comes to interest rates: and it’d also, in itself, help get the deficit down. An inflation rate of 1.6% is getting rather uncomfortably close to deflation- which we certainly don’t need.

    • the viceroy’s gin

      …oh heck, let’s give it a try and see how it goes, shall we? Haven’t we experienced enough of the chicken littleism? No matter this Speccie lickspittle’s imaginings, real wages are stagnant. How about some growth policy, rather than this current w a n k i n g?

  • Des Demona

    RPI inflation, which for the average person in the street is more about what they feel in their pockets rather than slight of hand geometric CPI, is still at 2.5%.
    I think there’s a way to go yet before ”real” wages outstrips ”real” inflation.

    • Alex

      Spot on Des (if I may call you that).
      Given that house price inflation is nudging 10%, CPI is meaningless.
      Inflation is 1.6% if you don’t ned somewhere to live; otherwise it’s 2.5%.

      • dado_trunking

        I believe the £50k added by volume housebuilders to the price tag in select locations in the last six months accounts for less than 1% too. We spend far more than £5m pa, don’t we all?

    • Tom Tom

      Postage stamps just increased from 60p to 62p and Ukraine is being supplied gas from Western Europe cheaper than European consumers…….I am not sure I feel as joyous as James Forsyth but with his London earnings and wife at the BBC he may be in the money

      • the viceroy’s gin

        It’s always a challenge selecting the Speccie kid who is the most useful idiot for the LibLabCon clones in the bubble. This guy is it today.

  • Darnell Jackson

    Labour talk down the economy, they have nothing else.

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