CPI set to rise again this year
The latest Inflation Report, released by the Bank of England this week, shows that CPI inflation is set to rise further this year and the Office of National Statistics will announce the latest figures on Monday (15th August).
However, as of June the figure was 4.2% - twice that of the 2% target set by the Bank of England and it believes that it could hit 5% later this year thanks to the increase in utility price prices, and the continuing impact from past increases in VAT, oil and other import prices.
It claims that falls will be seen through 2012 and 2013 but said it could neither estimate the timing or extent of the expected fall, which it believes will result from the impact of the factors that are currently fuelling inflation (such as utility prices) diminishing as well as downward pressure from slack in the labour market continuing.
The Bank of England’s report showed that the squeeze on real incomes continued with households’ consumption falling for the third consecutive quarter fuelled a sharp fall in private domestic demand in the first quarter of 2011.
However, it says growth is likely to remain sluggish in the near term, GDP should gradually pick up although it could be 2014 before it rises above its historical average.
These worrying figures were supported by the latest figures from the BRC which said although sales in July were up 2.5% on the same month last year, consumers were buying less than before.