GBP: UK households set to feel the effects of living cost increases

The big talking point from yesterday was that UK consumer price inflation increased to 3.1% in November. Economists had been hoping that 3% was the ceiling and that inflation would come down, but yesterday put paid to that. For now at least. A report by the Office for National Statistics showed that the increase was largely down to a slower-than-expected decrease in air fares and an increase in computer games.

The worry is that as inflation continues to outpace wage growth, more and more UK households will feel a squeeze to living costs. While many do expect inflation to start falling in 2018, the dips are only expected to be gradual; if this affects consumer spending, then economic growth will also be affected. There is real potential for a domino effect over the coming months.

Today sees the release of the unemployment rate for October. It is expected to stay unchanged at 4.3% – the lowest mark since 1975. Average earnings will be released too and are expected to confirm that as inflation increased, wages stayed the same at 2.2% (excluding bonuses).