In the closing months of 2017, UK inflation is expected to quadruple to approximately 4%, cutting disposable income in the process.
According to the National Institute for Economic and Social Research, the effect of inflation that is causing a rise in prices across the economy will increase at an alarming rate during 2017 as the fall of the pound is passed onto consumers. This is a 1% rise since August’s forecast, which cited the rise would merely be 3%. Looming “significant risks” also pose a risk to economic growth.
Speaking to the BBC, Dr Angus Armstrong, director of macroeconomics at NIESR, raised the question, “Households have really got a choice. Do they spend less or do they start saving less?” With savings ratios plummeting to their lowest levels since 2008, Angus adds, “the most likely scenario is that they spend much less, hence the weaker [growth] forecast for next year.”
The Office for National Statistics released information last month which showed a 1% inflation rise in Consumer Price Index in September, a 0.4% rise since August, the highest it’s been for almost two years. This figure affected the cost of a wide variety of things, with clothes, petrol and even hotel rooms all falling victim.