It has been reported that UK inflation rose much faster than expected in June, with consumer prices expanding by 1.6 percent year-on-year.
The information comes as a new research looking at household incomes revealed that young people had been especially hard hit by the financial crisis.
The rising cost of clothing, food and non-alcoholic drinks helped drive inflation higher, which Howard Archer, Chief UK Economist at IHS Global Insight, said was “disappointing news” for consumers: “The rise back up in inflation squeezes consumers’ purchasing power, especially as earnings growth currently remains muted and relapsed in April,” he said in a note.
Low wage growth has plagued Britain’s economic recovery, failing to pick up despite firm signs elsewhere of a strengthening economy. Average weekly pay (including bonuses) in the three months to April expanded by just 0.7 percent year-on-year. This was below expectations and down from 1.9 percent in the three months to March.
“It is becoming harder for people to get by as average wages continue to fall behind the rising cost of living. Ministers may have moved on from Britain’s living standards crisis but it’s still the top concern for families,” Frances O’Grady, general secretary of the TUC union, said in a statement. “An economic recovery based on shrinking pay packets is not one built to last.”
Young Britons have been hit hard by the rise in living costs, with a report by the Institute for Fiscal Studies (IFS) finding that “the recession and its aftermath have been much harder on the young than the old.”
Between 2007-2008 and 2012-2013, real (inflation-adjusted) median household income among 22-30 year olds fell by 13 percent. In comparison, income fell 7 percent among 31-59 year olds, and remained stable for those aged 60 and over.
This slide in real wages was driven, firstly, by a fall of 4 percentage points in employment of those in their 20s, the IFS said. The employment level remained unchanged among 31-59 year olds. Secondly, young peoples’ real median pay fell by 15 percent, while for people between the ages of 31-50, pay fell just 6 percent.