House­holds warned that prices are set to rise fur­ther

The Sunday Telegraph - Money & Business - - Front page - By Tim Wal­lace

FAM­I­LIES are braced for an­other fi­nan­cial squeeze as of­fi­cial fig­ures pub­lished this Tuesday are set to show in­fla­tion is mount­ing once more.

Price rises slowed in June and lower petrol prices re­strained in­fla­tion. But econ­o­mists be­lieve pres­sures are ris­ing again, pre­dict­ing in­fla­tion edged up from 2.6pc in June to 2.7pc in the 12 months to July – and the surge in costs is set to con­tinue.

The ris­ing cost of for­eign hol­i­days due to the fall in the pound is one factor, as is food in­fla­tion. “We view [June’s dip] as a tem­po­rary pause in the up­wards trend, rather than the be­gin­ning of a down­wards glide-path for in­fla­tion,” said Alan Clarke, econ­o­mist at Sco­tia­bank, who pre­dicts in­fla­tion of 2.8pc in July. He ex­pects prices will rise fur­ther over the rest of the year: “The peak in in­fla­tion is yet to be reached. In­deed, the Bank of Eng­land’s up­dated pro­jec­tion sees con­sumer price in­fla­tion reach­ing a peak of 3pc year on year in Oc­to­ber. While our forecast is frac­tion­ally higher than the Bank’s, we ap­pear to be in good com­pany.”

At the same time econ­o­mists do not ex­pect to see any signs of ris­ing wage growth in June, pre­dict­ing an in­crease of 1.8pc in numbers out on Wed­nes­day – mean­ing earn­ings are fall­ing fur­ther be­hind prices.

How­ever, econ­o­mists ex­pect em­ploy­ment to keep on ris­ing as com­pa­nies con­tinue hir­ing staff. On av­er­age they an­tic­i­pate an 85,000 rise in em­ploy­ment with the job­less rate hold­ing steady at 4.5pc, the low­est since 1975.

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