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The UK’s crisis of life has escalated to a level this week, with a series of data releases highlighting how the economy is fighting on almost every front.
Bank of England Governor Andrew Bailey headlined his prediction that rising food costs could be an “optical” consequence for society’s poorest people, with breakfast TV shows devoting huge chunks to discussing the issue, with big banners calling it a crisis. By 6
Economic reports have already shown how bad things are already. Inflation in April was driven by a 40-year high of 9%, an increase in energy costs. Consumers have reached their lowest point in almost five decades, surpassing the financial crisis, the epidemic or even the terrible days of the 1970s.
The information has brought home the gloom of the current situation and made it clear that perhaps getting down the track is even worse. The government of Prime Minister Boris Johnson has indicated that there is little prospect of additional support for consumers.
In his keynote address this week, Chancellor of the Exchequer Sage Sunak focused on the reasons for not working, saying he was concerned that additional government spending to help people manage higher bills increased the risk of inflation. He warned of a difficult time for the UK and said his goal was to reduce business taxes to clear long-term structural problems in the economy. A windfall tax on oil companies was quickly dropped.
The BOE, meanwhile, has resisted the onslaught of politicians, saying Bailey should have moved faster in the fight against inflation. Chief Economist Hu Peel said Friday that only the Treasury has the tools to help.
Here are five charts that tell the story of a dark week for the UK economy.
1. Rising inflation
Consumer prices rose 9% year-over-year from April, the fastest rate since March 1982. The rise in electricity prices from 7% in March reflects an uptick in the wholesale market, which increased consumer bills by 54% in April.
Read more: UK inflation rises to 9% as inflation rises sharply since Thatcher era
2. Reduction of actual wages
The rise in prices means that UK workers, who have been waiting a long time for significant pay rises, are now seeing their best growth in years that have been completely plagued by inflation.
Tuesday’s data showed wages rose 4.2% in the first quarter, averaging 2.1% in the decade before the epidemic, and wages adjusted for profit. The 1.9% fall in March compared to a year ago is the largest since 2013.
Read more: UK cost-of-living squeezing intensifies with real wage cuts
3. Decreasing consumer confidence
Against that background, it is not surprising that consumers are experiencing pain. Market researcher GfK says its closely monitored sentiment is down 2 points this month to minus 40, the lowest since the record began in 1974.
Buyers respond by spending less on big ticket items and trying to save money by socializing at home – which is an amazing jump in April retail sales that will probably boost the power of UK consumers.
Read more: UK consumer confidence falls to lowest level since 1970
4. Shrinkage of labor force
Official figures on Tuesday show that the UK’s workforce has shrunk. Since the epidemic, nearly half a million more people have been listed as inactive – not in the workplace or looking for work. This means that the workforce is about 2% more than before the Covid injury, which will drag out output and tax payments to the Treasury. This is already making it harder for employers to fill jobs.
Read more: Britain’s workforce shrinks despite rising wages and bonuses
5. Unemployment relief
The main reason for economic optimism this week came from the UK labor market, with unemployment falling to 3.7% – the lowest rate since 1974. Job vacancies have risen to a new record.
Even these metrics can soon feel the heat from the crisis. The BOE expects the number of unemployed to start rising by the end of the year as employers respond to the sharp decline in demand.
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