Prices are rising at an annual rate of 3% in the UK according to the latest evidence. This comes after the rate of the EU referendum according to figures seen by Sky news.
This jump implies that real incomes are falling for the first time since 2014. This could be a sign that households are being squeezed as a result of the decision to leave the EU.
While the UK’s official inflation measure, the consumer price index, was 1.8% in January – well below the 2.7% annual rate at which wages are rising – economists have warned that because many of the CPI datapoints are collected manually the index is sometimes slow to reflect sharp changes in prices.
One respected measure of UK prices devised by MIT economics and collected from retailers online show that prices are rising much faster lately.
The PriceStats inflation measure, published by State Street and seen by Sky News, shows that prices were only rising at an annual rate of less than 1% before the referendum but this rate has risen to 3.3% in recent weeks.
These statistics imply that real wages, pay growth adjusted for inflation, may now be falling at an annual rate of 0.6% – compared with the positive 0.9% growth rate implied by the official inflation data.
In the Budget this Wednesday, the Office for Budget Responsibility is expected to confirm that inflation will rise comfortably above 2% in the coming year, as the higher cost of imported goods feeds into Britain’s shopping baskets.
The PriceStats data suggest those price increases are feeding through far faster than economists had originally expected.
The data which was obtained through listing thousands of prices on the internet, does not reflect prices in high street shops and only reflects goods prices rather than services – but economists see it as a useful forward indicator for the official inflation measure.
According to the ONS’s own numbers, services inflation is running even higher than goods inflation, at 2.6%.
The ONS is working on its own experimental statistics collecting price data by scraping it off the internet, as with the PriceStats series.
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