Live, rolling coverage of business, economics and financial markets as economists predict price growth will slow
Good morning, and welcome to our live, rolling coverage of business, economics and financial markets.
Rising energy prices, food prices, broadband prices – the UK economy has been under pressure from inflation since the start of 2021. Today we will find out if those pressures have eased, with the Office for National Statistics due to publish the latest inflation data shortly.
After a second consecutive drop in annual inflation to end 2022, we expect headline inflation to continue its slow descent to start 2023. If our inflation projections are broadly on the mark, CPI inflation will register its first monthly drop in 12 months.
Easing inflationary pressures due to falling energy prices. Looking ahead, we continue to see inflation slowing down more acutely from H2-23. Falling expected energy prices, easing core goods inflation, and lower food prices over the course of the year will continue to drag on price momentum.
UK consumers endured a torrid year in 2022, as very high inflation weighed on spending power. We estimate that real household disposable income fell by 1.7% over the calendar year, which would be the biggest year decline since 2011. This year will be another challenging one for household finances as inflation is set to remain high, fiscal policy is being tightened, and mortgage costs will rise.
So the chances of avoiding a large fall in consumer spending are likely to rest on consumers saving less or borrowing more than they currently do – neither of which they have shown any inclination to do so far.
10am GMT: Eurozone industrial production (December; previous: 2% year-on-year; consensus: -0.7%)
1:30pm GMT: US retail sales (January; prev.: -1.1% month-on-month; cons.: 1.8%)
2pm GMT: Christine Lagarde, president of the European Central Bank, at European parliament
