PS US Fed chair Jerome Powell is testifying to lawmakers - you can watch here.
Watch Powell's testimony to Congress on the Fed's inflation fight, state of the economy https://t.co/Yuy6vzysmV
— CNBC (@CNBC) June 22, 2022
Updated
Closing summary
Wall Street opened lower ahead of Federal Reserve chair Jerome Powell’s semi-annual monetary policy report in Congress, with investors eager for clues on future interest rate hikes and the state of the economy.
Over here, the UK’s FTSE 100 index is trading almost 100 points lower at 7,058, a 1.3% drop. Germany’s Dax has lost 233 points, or 1.75%, to 13,059, France’s CAC has slid 91 points, or 1.6%, to 5,870, and Italy’s FTSE MiB is down 386 points, or 1.75%, at 21,704.
Our main story today:
UK inflation has increased to 9.1%, its highest rate in 40 years amid record prices for petrol and the soaring cost of food.
The figures from the Office for National Statistics showed an increase in May from 9% in April, as measured by the consumer price index, in a reading that matched the forecasts of City economists. In a fresh high, the headline inflation rate has hit a level not seen since early 1982, piling pressure on households in the cost of living crisis.
Inflation is being fuelled by food and non-alcoholic drink prices, which are rising at the fastest annual rate since 2009, the ONS said, with the most dramatic increases seen in the cost of bread, cereals and meat.
Our other stories:
The Boston-based biotech Moderna is to build the UK’s first research and manufacturing centre dedicated to the development of mRNA vaccines against new Covid variants and other respiratory illnesses, in an effort to improve readiness for future pandemics.
Under a £1bn deal with the UK government, construction of the new centre – Moderna’s first facility in Britain – could begin later this year and is expected to start producing the first shots in 2025. The government has committed to buying Moderna’s vaccines for the next decade.
The jabs are based on messenger RNA, the molecule that teaches our cells to make specific proteins that will trigger an immune response inside our bodies. Moderna developed one of two mRNA vaccines worldwide against Covid-19, alongside the one produced by Germany’s BioNTech and US firm Pfizer.
Moderna’s chief executive, Stéphane Bancel, said the priority was to develop a jab combining boosters against Covid, flu and respiratory syncytial virus (RSV). RSV usually causes mild, cold-like symptoms but can be serious for infants and older people.
Thank you for reading. We’ll be back tomorrow. Take care, JK
Wall Street has opened lower, as Federal Reserve chair Jerome Powell testifies to lawmakers in Congress, giving his semi-annual report. Investors are waiting for clues on future interest rate hikes and the state of the economy.
The Dow Jones fell 178 points, or 0.6%, at the open to 30,352, while the S&P 500 lost 31 points, or 0.8%, to 3,733, and the Nasdaq dropped 127 points, or 1.2%, to 10,941 at the opening bell.
You can watch Powell here.
US inflation hit 8.6% last month, the highest since December 1981.
Last week, the Fed hiked rates by 75 basis points, or 0.75 percentage point. “Clearly, today’s 75 basis point increase is an unusually large one, and I do not expect moves of this size to be common,” Powell said then. He added, however, that the central bank would lift rates by another 50 or 75 basis points next month.
Updated
UK headline inflation picked up to a fresh 40-year high last month, the highest in the G7 group of nations – our main story today – and UK house price gains also accelerated.
House prices rose 12.4% in the year to April, up from 9.7% in March, according to the Office for National Statistics. London continues to be the region with the lowest annual growth, at 7.9%.
The average UK house price was £281,000 in April 2022, which is £31,000 higher than a year earlier.
Average house prices increased over the year in England to £299,000 (up 11.9%), in Wales to £212,000 (up 16.2%), in Scotland to £188,000 (up 16.2%) and in Northern Ireland to £165,000 (up 10.4%).
Updated
UK extends trading plan to sell taxpayer stake in NatWest
The UK government has extended the time period it will take to sell down the taxpayer’s stake in NatWest Group by another 12 months, as concerns over the global outlook weigh on the share prices of Britain’s biggest banks.
The Treasury said today that it will only sell its remaining 48.5% shareholding in NatWest “when it represents value for money to do so and market conditions allow”. It bailed out the bank, then known as Royal Bank of Scotland, during the financial crisis of 2007-9.
The trading plan, which was launched last August, has been extended until 11 August, 2023. All sales to date have been below the bailout price of 502p per share, which means losses for taxpayers.
So far around 703.5m shares have been sold through the trading plan, raising £1.6bn for the taxpayer.
The NatWest share price rose 4.3% to 230.8p.
Petrol and diesel prices hit new records – RAC
Unfortunately, average fuel prices rose again to new records on Tuesday, the first day of the rail strikes when more people took to the roads, the RAC says.
The average price of petrol increased to 189.33p, taking a full tank over the £104 mark (£104.13). Diesel also reached another new high at 197.11p, putting it close to the £2-a-litre milestone. A full fill-up of diesel for a 55-litre family car now costs on average £108.41.
RAC fuel spokesman Simon Williams said:
But with the oil price falling and wholesale costs down over the last week, pressure is mounting on the biggest retailers to turn the tide and put petrol pump prices into reverse. It now seems we’ve reached the current petrol peak, so we expect to see the big four supermarkets start to cut their prices. As they dominate UK fuel retailing this should lead to others reducing their prices too which will benefit drivers everywhere.
The situation with diesel is different unfortunately as wholesale prices last week still put it on course to move closer towards an average of £2 a litre. If, however, oil continues to trade lower it could just prevent this from becoming a reality.
On the markets, European shares are plunging and getting closer to a bear market (defined as a 20% decline from the most recent peak).
The pan-European Stoxx 600 benchmark index is down 1.7% to 401 points and is just 1% away from notching up a 20% drop since its all-time high of 495.46 points on 4 January, Reuters reports.
The German, French and Italian bourses are back to the lows hit in March in the early days of Russia’s invasion of Ukraine. Germany’s Dax and Switzerland’s SMI have already entered a bear market.
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Melanie Baker, senior economist at Royal London Asset Management has looked at what the rise in UK inflation to 9.1% means for interest rates, and consumers.
There was again little here to reassure the Bank of England – inflation remains well above target, core inflation is well above 2% and services inflation has risen quickly over the past year. Some measures of inflation expectations look elevated and the labour market still looks tight.
It is unlikely that we’ve seen the last rate rise this year. By raising interest rates, the Bank can cool demand to bring it down in line with supply. By acting and sounding serious about tackling high inflation, they can help lower inflation expectations. However, the Bank still aren’t sending as strong a message as they could with the last set of minutes sending an ambiguous message on their interest rate outlook.
In the meantime, these high rates of inflation continue to run faster than pay growth and the financial situation of many households will be worsening. High inflation, especially on essentials like food and energy, combined with the central bank rate hikes means the outlook for the consumer remains challenging. Consumer confidence and May retail sales data are out on Friday and are both expected to be weak.
Europe needs to ready for Russia to turn off all gas exports, says IEA
Europe needs to prepare immediately for Russia to turn off all gas exports to the region this winter, according to the head of the International Energy Agency, who has called on governments to work on reducing demand and keeping nuclear power plants open, writes my colleague Jo Partridge.
Fatih Birol said reductions in supplies in recent weeks the Kremlin has attributed to maintenance work could, in fact, be the beginning of wider cuts designed to prevent the filling of storage facilities in preparation for winter, as Russia seeks to gain leverage over the region.
“Europe should be ready in case Russian gas is completely cut off,” he said in an interview with the Financial Times. “The nearer we are coming to winter, the more we understand Russia’s intentions.
“I believe the cuts are geared towards avoiding Europe filling storage, and increasing Russia’s leverage in the winter months.”
EU countries are racing to refill storage sites, with Germany hoping to reach 90% of capacity by November. Its stores are only half full.
Member states have also been working to reduce their reliance on Russian fossil fuels, by sourcing gas from other countries, including the US, and by speeding up the switch to renewable energy, although officials have conceded that the race to phase out Russian oil and gas would mean burning more coal and keeping nuclear plants going.
Here is our analysis of the UK inflation figures. Our economics editor Larry Elliott writes:
Are we there yet? Each month the same question is asked about the UK’s inflation rate. Is there any sign of the cost of living crisis abating? And each month the answer is in the negative. The current upward trend has further to go.
May’s increase in the consumer prices index – the government’s preferred measure of inflation – was modest by recent standards but even so the rise from 9% to 9.1% was a new 40-year-high.
More worrying was the evidence provided by the producer price index that there are more price rises to come.
The PPI is a measure of what is happening at an industry level to the costs paid by companies for their fuel and raw materials, and the costs they are charging to their customers. It is an indicator of price pressures before they reach consumers.
Here the message is grim. Fuel and raw material prices were up by more than 22% year on year – the fastest rate since modern records began in 1985. The price of goods leaving factories are increasing at an annual rate of 15.7%, up from 14.7% in April. The Office for National Statistics said that was the steepest rise in 45 years.
Moderna to build new vaccine centre in Britain
The Boston-based biotech Moderna, which developed one of two mRNA vaccines worldwide against Covid-19, will build a new research and manufacturing centre in the UK to develop vaccines against new Covid variants and other respiratory illnesses – and improve readiness for future pandemics.
The centre is expected to start producing the first mRNA shots in 2025, and the UK government has committed to buying Moderna’s vaccines for the next decade.
The firm’s chief executive, Stéphane Bancel, said the priority was to develop a jab combining boosters against Covid, flu and respiratory syncytial virus (RSV), which usually causes mild, cold-like symptoms but can be serious for infants and older people.
mRNA technology proved one of the fastest routes to produce an effective vaccine against Covid, and can also be used to tackle other diseases, such as cancer and heart disease.
Boris Johnson said:
Our investment will guarantee jabs in arms against some of the toughest viruses out there, bringing us to the forefront of the fight against future threats. We’ve all seen what vaccines can do, and today’s partnership brings us one step closer to finding cures for some of the most devastating diseases.
The health secretary Sajid Javid added:
Our new partnership with Moderna will cement the UK’s status as a science superpower, significantly boosting the economy and creating jobs - and it has the potential to unlock the next generation of cutting-edge vaccines to fight diseases such as Covid, seasonal flu and RSV.
Oil prices tumble as Biden set to cut US fuel costs
Oil prices have tumbled more than 5% today, as US president Joe Biden prepares to cut fuel costs for drivers in a move bound to worsen the already fraught relationship between the White House and the US oil industry.
Biden is expected to call for a temporary suspension of the 18.4 cents per gallon federal tax on gasoline, Reuters reported, citing a source. The announcement is expected at 7pm BST. The US, the world’s biggest oil consumer, is struggling to contain soaring gasoline prices and sky-high inflation.
Brent crude, the global oil benchmark, is trading $4.32 lower at $109.72 a barrel, while US light crude has lost $4.72 to $104.35.
Tomorrow, executives from seven oil companies are set to meet the US president, under pressure to drive down fuel prices as they make record profits.
Stocks, sterling, euro sell off amid growth fears and higher UK inflation
The sell-off in European stock markets is gathering pace. The Stoxx 600 of Europe’s leading shares has touched its lowest level since February 2020, and is now trading 1.8% lower at 401.26 points.
- UK’s FTSE 100 down 97 points, or 1.35%, at 7,055
- Germany’s Dax down 296 points, or 2.2%, at 12,996
- France’s CAC down 113 points, or 1.9%, at 5,851
- Italy’s FTSE MiB down 50 points, or 2.3%, at 21,586
The pound and the euro have dropped, as investors bought US dollars instead, seen as a safe haven, amid concerns about global growth prospects and the rise in UK inflation to a fresh 40-year high.
Sterling fell 0.8% to $1.2198, touching its lowest level in almost a week after headline inflation hit 9.1%, the highest among the Group of Seven countries. The euro fell 0.4% to $1.0497, and the dollar index rose 0.3%.
Updated
Here is our full story on inflation:
Paul Dales, chief UK economist at Capital Economics, said:
The rise was in line with the consensus forecast and a bit lower than our forecast of 9.2% and the 9.2% the Bank projected when it published its Monetary Policy Report in May. The increase in May was mainly due to a further leap in food price inflation from 6.7% to a 13-year high of 8.5%. With the influence of the increases in agricultural commodity prices yet to feed in full into prices on the supermarket shelves, we think that food price inflation will rise above 10% in September.
The increase in food inflation was partly offset by falls in clothing inflation, from 8.3% to 7.0%, and recreation/culture inflation, from 5.9% to 5.0%. In both of those categories, the level of prices in the shops still rose this May. But their inflation rates fell as prices rose at a slower rate than they did in May last year.
CPI inflation is not yet close to its peak. With two-thirds of the observation period for the Ofgem price cap having now passed, something like a 40% rise in utility prices is pretty much baked in the cake for October. We think that will take CPI inflation to a peak of around 10.5% in October.
Even so, it is not obvious in this release that there are signs of the “more persistent inflationary pressures” that last week the Bank said would prompt it to “act forcefully”. Core CPI inflation eased back from 6.2% to 5.9%. And within that, core goods inflation declined from 8.0% to 7.2%. That said, the further rise in core producer price inflation, from 13.9% to 14.8%, suggests that core goods CPI inflation will probably rise to 14% before long. And the rise in services CPI inflation from 4.7% to 4.9% took it to its highest rate since 1993 and suggests that domestic price pressures are still strengthening.
On its own, then, this release is probably not enough to seal the deal on a 50bps interest rate hike in August. Even so, we still think the Bank will raise rates from 1.25% now to 3.00% next year. That remains a higher forecast than the peak of 2.00% envisaged by the consensus of analysts.
More reaction to the UK inflation figures and what they mean for Bank of England policy.
Ian Stewart, chief economist at Deloitte, said:
Set against inflation of over 9.0%, base interest rates of 1.25% remain by historic standards very low. Significant rate rises lie ahead; we expect base rates to more than double in the next six months.
The Bank of England is presiding over what seems likely to be the sharpest tightening of monetary policy since the 1980s. It is touch and go as to whether the Bank will be able to curb inflation without triggering a recession.
The ONS has started tracking the price of the lowest-cost grocery items.
The sample contained a range of products from pasta or rice to milk or frozen vegetables. For each item, the price of the cheapest product was selected from online shops.
The highly experimental results showed that the lowest-priced items increased in cost by a similar amount to average food and non-alcoholic drinks prices, around 6% to 7% over the 12 months to April 2022. However, there is considerable variation in price movements across the 30 items.
My colleague, our Money editor Hilary Osborne, tweets:
Inflation well into double digits for lots of basic food stuffs now: low-fat milk is now 19.4% more expensive than a year ago, pasta and flour up by more than 16% each, oils and fats up 18%
— hilaryosborne (@hilaryosborne) June 22, 2022
While gas and electricity prices have soared in the UK following a jump in wholesale costs, other governments have done more to mitigate the impact on consumers.
The Spanish government intends to cut the value-added tax charged on electricity bills further, to 5% from the current 10%, prime minister Pedro Sanchez said today, Reuters reported. Last yer, Madrid reduced the value-added tax rate on electricity to 10% in a bid to slow down the effect of the wholesale electricity price rises on consumers.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, has crunched the numbers.
Looking ahead, we think the headline rate of consumer price inflation will hold broadly steady in June and during Q3, as further increases in food and motor fuel inflation are countered by a decline in core CPI inflation. Note that the month-to-month rise in the core CPI [excluding food and energy] in June 2021 was a hefty 0.5pp larger than its average June rise in the 2010s, primarily because services firms hiked prices as they exited the lockdown.
In addition, price rises should start to come off the boil for many discretionary goods, now that consumers have less money left over following big increases in food and energy prices. The run-rate of price rises in the services sector likely will ease too, now that hospitality and tourism businesses have fully responded to the return of their VAT rate to 20%.
Alas, the headline rate likely will climb to a new peak of about 10.5% in October, when Ofgem looks set to increase its default tariff cap by about 45%. But the decline in core inflation should gather momentum later this year, as recent falls in shipping costs are passed on to consumers and global producer output price inflation rolls over, now that both the inventory rebuilding cycle and the recovery in consumer demand are petering out.
We think that the monetary policy committee will stop hiking Bank Rate as soon as month-to-month increases in the core CPI have slowed to their long-run average rate—a point which we think will be reached in the autumn. As a result, we expect the committee to hike Bank Rate by 25bp in August and a further 25bp in September, before then leaving it on hold at 1.75% from November onwards.
Europe’s main share indices have opened lower.
The FTSE 100 index in London has lost 100 points, or 1.4%, to 7,051 at the opening bell. Germany’s Dax is down 1.7%, France’s CAC has lost 1.6%, Spain’s Ibex slid 1.2% and Italy’s FTSE MiB recorded the largest fall, of 1.8%.
To recap: UK inflation has risen to 9.1%, the highest rate in 40 years amid the soaring cost of food and record prices for petrol and diesel.
The figures from the Office for National Statistics showed that inflation, as measured by the consumer price index, hit its highest level since March 1982, adding to the strain on households, especially those on lower incomes.
The ONS said the main contribution came from food and non-alcoholic drink prices rising at the fastest annual rate since 2009. Bread, cereals and meat in particular became more expensive, while fruit prices were little changed last month. Food price inflation rose from 6.7% to a 13-year high of 8.5%.
Record prices for petrol and diesel also drove inflation higher as motor fuels jumped by nearly a third over the past year, the biggest annual increase on records dating back to 1989.
Producer prices have also gone up sharply, which will push up consumer prices further in coming months. Manufacturers’ costs rose by 22.1% in the year to May, the highest rate since records began in January 1985, while factory gate inflation picked up to 15.7%.
Last week the Bank of England warned inflation was on course to reach 11% later this year as gas and electricity prices soar. Meanwhile, the government and Network Rail are at loggerheads with rail unions in a bitter dispute over pay and conditions and the biggest train strikes since the 1980s. Rail workers have been offered a pay rise of just 2%.
Updated
Some Asda shoppers set £30 limits at the tills, says Lord Rose
Some Asda shoppers are setting £30 limits at the tills and petrol pumps, the supermarket’s chairman, Lord Stuart Rose, has said.
The former M&S boss told the BBC that customers are putting less in their baskets and switching to budget ranges as they worry about the future.
What we’re seeing is a massive change in behaviour.
People are trading back. They are worried about spending.
They’ve got a limit that they’ve set out, too. They say £30 is one limit... and if they get to more than £30 then that’s it, stop. It’s the same with petrol.
Lord Rose said he saw the inflation rise coming last year like a “train coming through a tunnel with a big flashing light on the top”. Now it’s time to “fasten our seatbelts”, he said, and urged the government to do more to help low-income households.
The retail veteran remembers the runaway inflation of the 1970s.
I’m of the generation that remembers what it was like last time. And once [inflation] gets hold, it’s quite pernicious.
And it takes a long time to eradicate... We’re in danger of being in a place that it’s very difficult to extricate ourselves from.
What’s rather sad is that the country, the government, perhaps the Bank of England didn’t see inflation coming quickly. They’ve now recognised that.
Joanna Elson, chief executive of the Money Advice Trust, the charity that runs National Debtline and Business Debtline, has urged the government to do more to help those on the lowest incomes, by “significantly raising benefits”.
With inflation now at 9.1%, rising costs are weighing heavily on household budgets. For many people, the increasing burden of high prices is already taking its toll and is only adding to the difficulty of meeting day-to-day costs.
At National Debtline and Business Debtline we are hearing from more and more people with deficit budgets – where their income simply isn’t enough to cover their basic needs. Our worry is that options are running out for people who are already in financial difficulty.
The package of further support recently announced by the government goes some way towards helping households under pressure. For those on the lowest income, however, urgent action is needed, including significantly raising benefits.
As inflation hits 9.1%, @ONS spokesman says he doesn't want to forecast when prices will come down.
— Paul Waugh (@paulwaugh) June 22, 2022
But says the "slowing economy" will take "pressure off prices" over medium term.
That's the govt's problem right there: no gain on tackling inflation without pain of lower growth
While food, energy and petrol costs all rose, games and toys became cheaper in May, reflecting price changes for computer games, particularly downloads. Overall prices fell by 2.4%, compared with a rise of 2.8% a year earlier.
However, the ONS warned that price movements for computer games can sometimes be large, depending on the bestseller charts, so “short-term movements need to be interpreted with caution”. Prices of television also fell.
You can read more here.
The chancellor of the exchequer, Rishi Sunak, said:
I know that people are worried about the rising cost of living, which is why we have taken targeted action to help families, getting £1,200 to the eight million most vulnerable households.
We are using all the tools at our disposal to bring inflation down and combat rising prices – we can build a stronger economy through independent monetary policy, responsible fiscal policy which doesn’t add to inflationary pressures, and by boosting our long-term productivity and growth.
However, he has been criticised for not doing enough to help those most affected by the soaring cost of living.
Average petrol and diesel prices in May were the highest on record, the ONS said — 165.9 pence per litre for petrol, compared with 127.2p a year earlier, and 179.7p per litre for diesel. The 12-month rate for motor fuels was 32.8%, the highest since before the start of the data series in January 1989.
Energy costs also pushed up consumer prices in May. The ONS said as wholesale gas prices quadrupled in the last year, the rise resulted in 12-month inflation rates of 53.5% for electricity and 95.5% for gas in April. These are unchanged in May.
Updated
UK inflation rises to 9.1%
NEWS FLASH: UK inflation has risen to 9.1% in May from 9% in April as the cost of living crisis worsens. It’s the highest since March 1982.
That’s the latest figures released by the Office for National Statistics. The ONS said rising prices for food and non-alcoholic drinks, compared with falls a year ago, pushed up the inflation rate.
Updated
The Covid pandemic and war in Ukraine have pushed consumer price inflation up to levels not seen in 40 years. But businesses face rising costs too. Brogan Taylor and Ryan Powell explain all in our latest blog. 👇https://t.co/wv4b8UMhlC
— ONS Focus (@ONSfocus) June 21, 2022
Low-income families in the UK’s poorest neighbourhoods are paying up to £541 a year more than affluent households to access the same basic services such as energy and insurance, and buy essential items such as TVs and fridges, according to a study, writes our social policy editor Patrick Butler.
The Fair by Design charity has called for the government and regulators to outlaw practices it says discriminate against the poorest families, costing them hundreds of pounds a year because of where they live, how much they earn, or how they are paid.
One in eight households in the UK experiences at least one type of poverty premium, paying on average £430 a year in extra costs, though it is far more prevalent in deprived areas, especially in the north and Midlands regions of England.
Britain’s cost of living crisis is being made worse by Brexit dragging down the country’s growth potential and costing workers hundreds of pounds a year in lost pay, new research claims, writes our economics correspondent Richard Partington.
The Resolution Foundation thinktank and academics from the London School of Economics said the average worker in Britain was now on course to suffer more than £470 in lost pay each year by 2030 after rising living costs are taken into account, compared with a remain vote in 2016.
In a report six years on from the referendum, the researchers said Brexit was damaging the competitiveness of UK exports on the world stage just as companies are forced to deal with the fallout from the coronavirus pandemic and Russia’s war in Ukraine pushing inflation to historic levels.
“A less open Great Britain is expected to be poorer and less productive,” it said.
Official figures due on Wednesday are expected to show a fresh rise in the inflation rate from 9% in April to 9.1% last month, as surging petrol prices and the rising cost of a weekly shop ramps up the pressure on struggling families. The Bank of England has warned the inflation rate could reach 11% by October.
Michael Hewson, chief market analyst at CMCM Markets UK, says:
Today’s main focus will be on the latest UK inflation numbers for May, as well as US Federal Reserve chair Jay Powell’s testimony to US lawmakers this afternoon.
Last week the Bank of England caused a few eyebrows to go up when they only raised the base rate by 25 basis points, while at the same time saying that they would act “forcefully” on inflation if necessary.
They then followed that up by saying they expect inflation to peak at an eye watering 11% by year end, an upgrade from its previous 10% estimate, begging the question as to what level of inflation would justify a bigger hike?
With headline inflation already at 9% this messaging merely served to showcase what a muddle the Bank of England finds itself in, and was reinforced yesterday by chief economist Huw Pill when he said that the central bank would allow growth to weaken in order to help the bank hit its 2% inflation target.
Introduction: UK inflation to rise to fresh 40-year high
Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets.
It’s inflation day in the UK, and the latest data are expected to show another increase in the cost of living to a fresh 40-year high. Economists are forecasting that the annual inflation rate rose to 9.1% in May from 9% in April, and will push higher into double digits in coming months.
A 9.1% rate would be the highest since March 1982, almost five times the Bank of England’s 2% target. Annual inflation was last in double digits in February 1982, when it was at 10.2%. The Office for National Statistics is due to release the latest consumer price index figures at 7am BST.
Inflation is expected to reach 11% by October by the Bank of England’s own estimates.
My colleagues Niels de Hoog, Ashley Kirk and Hilary Osborne have looked at how the cost of living crisis is hammering UK households (please note that Niels’ Twitter handle is @nielsdhg).
How is the cost of living crisis hammering UK households? @niels, @hilaryosborne and I dug into the data to explain the current squeeze on household budgets and how it fits into a longer-trend of income stagnation https://t.co/1Oy4soDLzx pic.twitter.com/PV1oguqdUv
— Ashley Kirk (@Ashley_J_Kirk) June 21, 2022
Philip Shaw, chief economist at Investec, said:
We are forecasting the headline CPI rate to remain at 9.0%, but expect a combination of firmer food costs, higher petrol prices and another sharp hike in the energy price cap (in October) to push inflation into double figures over the coming months.
At the same time, wage growth hasn’t kept up with inflation. Annual pay growth stalled at 4% in the three months to May, according to figures from XpertHR published yesterday. The report follows a Bank of England business survey that showed employers surveyed in May were not planning a further acceleration in pay rates.
This means that the spectre of a 1970s-style “wage-price spiral” that could force the Bank of England to raise interest rates dramatically hasn’t materialised, at least so far.
National rail services will start later in the day and with reduced schedules today, owing to the knock-on effects of yesterday’s walkout when 80% of services were axed. It was the first day of the biggest rail strikes in decades. There is more misery to come for travellers though: the second day of the rail strikes is tomorrow, and the third on Saturday.
Our transport correspondent Gwyn Topham has done a handy explainer on the strikes:
Asia-Pacific markets slipped again, despite gains of more than 2% on Wall Street’s main indices. Japan’s Nikkei is down 0.05% and Hong Kong’s Hang Seng has fallen 1.15% while the South Korean Kospi lost 1.9%. European shares are also expected to open lower.
The Agenda
- 1.30pm BST: Canada inflation for May (forecast: 7.4%)
- 2.30pm BST: US Federal Reserve chair Jay Powell testifies to lawmakers
- 3pm BST: Eurozone consumer confidence flash for June (forecast: -20.5)
