Britain’s inflation squeeze may actually intensify over the festive period, warns Ben Edwards, Portfolio Manager at investment giant BlackRock:
UK households may have to continue to endure higher costs in some segments over Christmas particularly as food retailers continue to pass on higher producer prices and airfares take their normal seasonal trip north.
But Edwards also predicts that inflation will ‘drift lower” in 2018.
That’s partly because the impact of the weak pound will eventually drop out of the data (as inflation compares today’s prices against the same items a year ago).
PwC: Inflation will outpace wage growth next year too
There’s little chance of UK wages catching up with inflation in the next few months, warns Andrew Sentance, senior economic adviser at PwC.
Sentance also blames the weak pound for pushing up the cost of living, saying:
The fall in sterling since the Brexit vote continues to push up the prices of imported goods and the strength of the global economy is also contributing to upward pressure on food and energy prices.
“We are probably close to the peak for inflation now, but it will only fall back gradually next year. That means price rises will continue to run ahead of pay growth in the first half of 2018 – continuing the squeeze on real incomes and consumer spending. That is likely to continue to act as a dampener on economic growth in the next few quarters.