Living costs rise as inflation rate ticks up
Prices rose by 2.5% in July, as forecast, from 2.4% in June, driven by higher transport costs. It is the 18th consecutive month that it has been above the Government’s 2% target,
Revised GDP Figures for Scotland suggest that Scotland’s GDP has outpaced the UK for the first quarter of 2018, with the growth rate increasing to 0.4% on the quarter, relative to the UK rate of 0.2%.
On an annual basis, Scotland’s growth rate is just above the UK’s, at 1.3% compared to 1.2%. This was mainly driven by an increase in output across the services and production sectors, with construction continuing to observe a drop in output, put at 1.4% in this estimate.
The inflation figures were seen as a dampener on recent signs up an uplift in wage growth.
Laura Suter, personal finance analyst at investment platform AJ Bell, said: “Coupled with this week’s wage inflation figures, which slid to a nine-month low at 2.4% including bonuses, the UK workforce is now failing to make more than the rise in prices each month.
“This is squeezing households and will in turn have a knock-on effect on consumer spending and the UK’s economic growth.”
July’s inflation figures are particularly important as they set the annual price hikes for rail commuters. Fares will rise by 3.2% from January, following a 3.6% hike in January this year.
Noting that commuters in the south of England were close to forking out £10,000 a year for rail travel, she said: “The Office for National Statistics has branded the RPI measure of inflation as ‘flawed’ with ‘serious shortcomings’ and does not recommend it being used, so it remains baffling as to why the Government continues to clobber everyone with price hikes based on an inaccurate measure.
“The fact that CPI is used for hikes that benefit Brits, such as state pension increases, tax credits or public-sector final salary schemes, while RPI is used for price hikes on rail fares and setting interest rates for student loans beggars belief. There is no logical justification for RPI’s continued use, and the Government’s insistence on using whichever measure best suits it should end.”
Scottish Labour noted that an annual Lockerbie-Edinburgh fare will now cost £5,250.
Selected fare rises:
- Lockerbie-Edinburgh, up £162 to £5,250.
- Glasgow-Edinburgh, up £126 to £4,082.
- Dundee-Edinburgh, up £137 to £4,449.
- Stirling-Glasgow, up £69 to £2,229.
- Aviemore-Inverness, up £51 to £3,203.
- Inverurie-Aberdeen, up £46 to £1,498.
Savers hit with double whammy
Ms Suter added: “The high inflation figures continue to clobber savers who are in many cases losing money on their savings in real terms. No easy-access savings accounts pay anywhere near as much as inflation, and banks stubbornly refuse to pass on all of the interest rate hike announced by the Bank of England earlier this month.
“Cash savers can find better deals by using high interest current accounts or regular savings accounts, although these often have caps on balances and require the transfer of direct debits. However, a few minutes spent shopping around for a better deal can stop savers’ money being eaten away by inflation.”
Dan Smith, investment analyst at Thomas Miller Investment, said: “Despite solid job creation and the unemployment rate at its lowest level since 1975 at 4.2%, wage growth remains weak.
“This trend looks unlikely to reverse in June, with the unemployment rate and annualised wage growth remaining at May’s 4.2% and 2.7% respective rates.”
On Thursday, retail sales, excluding fuel, are expected to rebound and show an increase of 0.2% over the month.