Key data

Inflation and recession loom over Tory prospects

Jeremy Hunt and Rishi Sunak
Jeremy Hunt and Rishi Sunak face a crucial week

Rishi Sunak and Jeremy Hunt face a double dose of vital economic data this week as figures will show inflation rising and the possibility that the UK has slipped into recession.

Higher global energy prices that forced Ofgem to increase the price cap on household bills are being blamed as the chief culprit for the uplift in inflation from 4% in December to an estimated 4.2% last month.

The rise may weaken claims that inflation will fall to the Bank of England’s 2% target by April and delay a cut in interest rates from their current level of 5.25%.

Chief Secretary to the Treasury Laura Trott said: “I have always said [inflation] does not fall in a straight line. There will be bumps in the road, and … we can expect inflation to slightly increase when data for January is published.”

The inflation data comes ahead of gross domestic product (GDP) data which will determine if the economy has slipped into recession.

Should it confirm a second quarter of contraction it will put additional pressure on the Chancellor Mr Hunt just weeks before his last Budget before the general election.

The economy contracted in the third quarter and analysts believe it contracted in the fourth quarter, though the broad view is that any recession will be marginal and short-lived.

There is also data this week on employment and wages.

At the end of last year the Prime Minister achieved his goal of halving inflation and together with Mr Hunt he is planning a series of tax cuts to be announced in the Chancellor’s 6 March Budget.

Both are confident that the economy will improve this year and that it is premature for critics to write-off the Tories’ chances in the election due in the second half of the year.

Ms Trott said: “We know the job is not done, but because of the progress we have made, we have been able to afford tax cuts that reward work and grow the economy, as well as helping tens of thousands more people into work.”

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