Today's news on inflation is certainly welcome; but we're not on the home straights yet.
A degree of Tory triumphalism is in the air this morning on the back of the latest inflation figures. As expected, the rate of inflation has fallen, this time from 1.9 to 1.7 per cent – the lowest it’s been since 2009.
Make no mistake, this is excellent news. After three years of falling living standards the news that wages are finally starting to catch up with prices should be welcomed by everyone.
However it’s important to get a little perspective: wages are still catching up with inflation – they haven’t caught up. As Richard Campbell of the Office for National Statistics (ONS) told BBC News today:
“Prices are still going up, they are still going up by more than earnings so people will still continue to see some pressure… Although the rate of inflation has fallen, prices overall are still going up and people will still be feeling the pressure.”
As the graph demonstrates, month on month people are still getting poorer as inflation continues to outpace wage growth (albeit by a smaller margin than previously).
Before the chancellor uncorks the champagne, it’s also important to note that even when wages do eventually start to grow faster than inflation there is a lot of ground to make up. The effect of years of stagnant and falling wages has been cumulative – this is why on average people are in real terms £1,600 a year worse off since 2010.
Today’s news is certainly welcome; but we’re not on the home straights yet.
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8 Responses to “Inflation: Less triumphalism please, the cost of living crisis is far from over”
Selohesra
Its absurd to just blame present govt for falling living standards – it was inevitable everyones living standards would fall after Labour’s recession cratered the economy
Dave Stewart
I am not a Labour supporter but felt I should mention Labour did not create a global recession. Please stop repeating this falsehood unless you wish to explain exactly how Labour managed to effect dangerous lending practices in the USA and all over the world. Under the last Labour government national debt was stable or falling even with all of the Labour spending (http://www.primeeconomics.org/?p=1757). It was only the resultant bailouts and drop in tax reciepts as a result of the GLOBAL recession that national debt began to rise.
John
“After three years of falling living standards the news that wages are finally starting to catch up with prices should be welcomed by everyone.”
Ermmm…no…the last wage increase indices I read was a few days ago and said wages had increased by 1.4% year on year that is still less than inflation at 1.7%. So prices are still increasing faster than wages. Albeit, at a slower rate. Furthermore, given the length of time that wages have been stagnated and rampant inflation it will take more that a decrease in inflation for “wages to finally start catching up with prices”.
nodbod
To concur; since 2008 I have had three annual 1% payrises and in the remainder I have received 0%. Still, as long as Dinny Dave a Giddy Gideon believe that I am better off, what would I know?
James Bloodworth
The article states that wages are “starting to catch up with prices”. It doesn’t say they have caught up.