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In Britain, several pieces of dispiriting economic news arrived this week: Prices are rising at their fastest pace in 30 years, wages adjusted for inflation fell the most in nearly eight years and the economy hardly grew in February.
It is mounting evidence of what is turning out to be a challenging year for many, with the tightest squeeze on household budgets forecast since records began in 1956.
Even before Russia invaded Ukraine, Britain’s economic growth had slowed. But that war has weakened Britain’s economic outlook, as is the case in many countries. Rising energy costs are passing through to household bills. Manufacturers, farmers and supermarkets have warned about the rising cost of essential inputs into their supply chain from goods produced in Russia and Ukraine — including metals, wheat, fertilizer and sunflower oil. The pain is wide-reaching: Even fish and chips, a traditionally cheap British staple, has jumped in price.
The Consumer Prices Index rose 7 percent in March from a year earlier, up from 6.2 percent the previous month, the Office for National Statistics said Wednesday. That exceeded economists’ predictions. Inflation was driven by record prices for gasoline and diesel, as well as by large increases at restaurants and hotels, for food and drinks, and clothing and furniture.
This broad-based increase in prices for products that are usually seen as less volatile “will be viewed with particular discomfort 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 their prepandemic level in an effort to arrest price increases, even as policymakers have cut the outlook for economic growth.
The statistics agency also said on Wednesday that wholesale prices were rising at their fastest pace since September 2008. Output prices of manufacturers rose nearly 12 percent in March from a year earlier, while their input prices rose 19 percent, a record high.
On Tuesday, data showed Britain’s unemployment rate fell to 3.8 percent, back to its prepandemic low, while there are a record number of job vacancies. Signs of a tight labor market are fueling expectations that workers will be in a position to demand larger salaries. Wages, excluding bonuses, in December to February rose 4 percent from a year earlier, but at the moment the gains are being eaten away by inflation. Once adjusted for price increases, pay fell 1 percent, the most since mid-2014.
The British economy has recovered from its pandemic slump, but growth is waning. After the Omicron wave subsided in February, bookings for accommodation and travel services increased, offering the main contributor to economic growth that month. The economy grew just 0.1 percent, as manufacturing of cars, electrical products and chemicals all declined, the statistics agency said on Monday.