Inflation and wages set to falter this week as economy on pause until after EU referendum
A stuttering labour market and a dip in inflation are set to be revealed later this week, in mounting signs that the UK economy is struggling for momentum.
Figures to be released by the Office for National Statistics (ONS) are set to show inflation falling back towards zero, the number of people in work to remain unchanged and wage growth to stay glued below two per cent.
Inflation was running at 0.5 per cent in March – its highest level in 15 months – but this was propped up by early Easter holidays which meant air fares soared by more than one-fifth during the month. With prices now back down, the consumer prices index (CPI) – released tomorrow – is set to come in even further below the Bank of England’s official two per cent target at around 0.3 per cent for April.
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The headline rate of unemployment, at 5.1 per cent, is likely to be unmoved in numbers out on Wednesday. Last month revealed a surprise rise in unemployment in February, with 20,000 more people out of work. This could have reversed in March, though analysts expected any employment gains could be in temporary and short-term roles given heightened uncertainty ahead of the EU referendum.
Wage growth, too, is expected to remain subdued, hovering below two per cent.
Combined, the figures could send the prospect of the first interest rate rise even further into the distance. Last week’s Inflation Report from the Bank suggested inflation would not reach two per cent until 2018 and financial markets have only fully priced in the first rate rise for mid-2019.