Rising food and clothing prices kept Britain’s inflation rate at its highest level for more than three years last month, putting household budgets under pressure as the Brexit effect on the pound worked its way through the economy.
Official figures put inflation on the consumer prices index (CPI) at 2.3% for the second month running in March, in line with economists’ forecasts, as food prices rose at the fastest pace for three years, increasing 1.2% on the year.
Economists said inflation was likely to push higher in April and they warned the rising costs of essentials such as groceries were already eating into household budgets and leaving people with less cash to spend on other items. Reports from retailers suggest sales slowed in recent months.
“Today’s release confirms our expectations that 2017 will see the end of the consumer spending boom which has driven economic growth in recent years,” said Nina Skero at the consultancy the Centre for Economics and Business Research.
“With the prices of essentials such as housing costs, food and transport on the rise, less money will be left over for discretionary spending. This is especially true given that wage growth is unlikely to keep up with the elevated inflation levels.”
Much of the pressure on inflation has come from the pound’s sharp fall against other currencies after last June’s vote to leave the EU. That makes imports to the UK more expensive, with firms now passing on those higher costs to shoppers. There has also been a marked effect on inflation in the UK and other countries from higher global oil prices.
Inflation has risen above the Bank of England’s 2% target from just 0.3% this time last year, bringing an abrupt end to a brief period when Britons enjoyed incomes rising in real terms, or faster than inflation.
“Rising prices and sluggish pay increases mean that real earnings growth has now ground to a halt,” said the TUC general secretary, Frances O’Grady. “Without government action, another living standards crisis is on the cards.