Several discouraging economic reports came across Britain this week: prices are rising at the fastest pace in 30 years, inflation-adjusted wages have fallen the most in nearly eight years and the economy barely grew in February.
It is growing evidence of what is proving to be a challenging year for many, with the pressures on household budgets predicted since the start of registration in 1956.
Even before Russia invaded Ukraine, Britain’s economic growth had slowed. But that war has weakened Britain’s economic prospects, as it has in many countries. Rising energy costs are passed on to household bills. Manufacturers, farmers and supermarkets have warned of the rising costs of essential inputs in their supply chains of goods produced in Russia and Ukraine, including metals, wheat, fertilizer and sunflower oil. The pain is far-reaching: even fish and chips, a traditional cheap British staple, have risen in price.
The consumer price index rose 7 percent in March from a year earlier, from 6.2 percent a month earlier, the Office for National Statistics said Wednesday. That exceeded economists’ predictions. Inflation was driven by record prices for petrol and diesel, as well as large increases in restaurants and hotels, food and drink, and clothing and furniture.
This broad increase in prices for products usually considered 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 to pre-pandemic levels three times since December in an effort to stem price increases, even as policymakers have lowered the outlook for economic growth.
The statistics agency also said on Wednesday that wholesale prices rose at the fastest pace since September 2008. Manufacturers’ output prices rose nearly 12 percent in March from a year earlier, while their input prices rose 19 percent, a record high.
On Tuesday, data showed that the UK unemployment rate fell to 3.8 per cent, back to its prepandemic low, while there is a record number of job openings. Signs of a tight labor market raise expectations that workers will be able to demand higher salaries. Wages, excluding bonuses, rose 4 percent in December to February from a year earlier, but at the moment profits are being eaten away by inflation. After adjusting for price increases, wages fell by 1 percent, the most since mid-2014.
The UK economy has recovered from the pandemic slump, but growth is slowing. After the Omicron wave subsided in February, bookings for accommodation and travel services rose, which was the main contributor to economic growth that month. The economy grew just 0.1 percent, while production of cars, electrical products and chemicals all fell, the statistics agency said Monday.