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Struggling British households could feel even worse off this week when official inflation figures show how quickly the cost of living is rising. Economists forecast a jump from 7% in March to 9.1% in April.

If the experts are correct, the consumer price index will be at its highest level since 1990, when the UK was in the grip of one of its worst post-war property slumps and a large-scale recession. scale.

Not that families need say – disposable incomes across the country have been hit hard. The price of unleaded petrol may have stabilized between £1.60 and £1.70 over the past month, but energy bills and food prices are soaring across the board .

James Knightley and James Smith, economists at ING, said the month-on-month rise would reflect a 54% rise in household gas and electricity bills since early April, following the lifting of the lockdown. energy price cap by regulator Ofgem.

The Bank of England, citing rising energy costs, forecast inflation to rise to double digits after the summer. “We are less sure it will get that bad, but again, inflation has consistently surprised on the upside,” he said in a statement.

Data on the job market will be released on Tuesday, a day before the inflation figures.

Central bank officials are most concerned about wage increases of about 5.4% in recent months and the extent to which workers will demand an increase in their monthly incomes to keep pace with the rise in the economy. inflation over the next year. It is the dreaded precursor to a wage/price spiral that could push inflation higher for years to come.

Some members of the Bank’s Monetary Policy Committee (MPC) believe that wage demands could skyrocket – and that employers will be forced to raise prices to recoup higher production costs – not just this year, but also next year, and maybe until 2024.

But at least two of the nine committee members indicated at their meeting earlier this month that they believed the opposite – that wage growth had already plateaued.

However, Tony Wilson, director of the Institute for Employment Studies think tank, believes the tight labor market will keep wages growing robustly. The UK has record levels of vacancies and an increasing proportion of staff changing jobs, making it difficult for employers to fill vacancies.

However, hundreds of thousands of companies operate with very thin profit margins and know that their customers are tightening their belts: this limits their room for maneuver to pay higher wages. These companies are likely to reduce production or reduce the level of service rather than raise prices.

“A restaurant is more likely to stop opening lunchtime than to hire a second chef with much higher salaries,” Wilson said.

Unemployment is expected to remain low at 3.8% – the same as the previous month – although that figure is flattered by the 500,000 workers, mostly over 50, who have left the labor market over the past of the last 18 months.

And since 2019, the Brexit effect has deprived employers of some 500,000 foreign nationals who needed to become active in the UK labor market.

That combined gap of a million workers was significant in trying to explain the state of Britain’s labor market compared to other economies of a similar size, Wilson said. For example, in France, where the rate of participation in the pandemic has remained the same, there is no loss of skilled workers and wages remain under control.

Wilson said the government should focus its efforts on helping those who had become economically inactive return to work. Instead, the only political action is over at the Bank, where there is talk of interest rate hikes to stifle inflation when the MPC meets in June and August.

However, Paul Dales, chief UK economist at consultancy Capital Economics, said his forecast that the base rate could rise from 1% to 3% now risked being too aggressive.

A determining factor is the prospect of a recession. The economy contracted 0.1% in March after stagnating in February. A recession may already be brewing.

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