Employment reaches new record high, but soft pay growth leaves workers squeezed - EY ITEM Club comments

15 February 2017

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  • Inflation continues to rise steadily
  • Albeit with January’s reading coming in below many expectations
  • CPI measure still on course to move close to 3% in the second half of this year

Martin Beck, senior economic advisor to the EY ITEM Club, comments:

“Although CPI inflation rose to the highest rate since June 2014, this represented a downside surprise. That inflation did not come in higher was largely due to heavy discounting in clothing stores.

“The petrol category continued to exert significant upward pressure on inflation, due to both base effects arising from last winter’s sharp drop in the oil price and price rises this January. And pressures continued to intensify in the supply chain, with both input cost and output price inflation reaching new multi-year highs.

“Overall, though January’s inflation reading was lower than anticipated, this does not alter the outlook. We are likely to see the effects of a weaker pound steadily pass along the supply chain to consumers, driving the CPI measure up towards 3% in the second half of this year.”