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PwC comments on ONS April CPI figures

18 May 2022

Barret Kupelian, senior economist at PwC, says,

”April’s headline CPI inflation rate grew by 9% which is the highest rate for 40 years. This increase was mainly driven by the impact of the lifting of the energy price cap earlier this year,  the reversal of the VAT cut in the hospitality sector and the wider supply chain issues in the economy. Staggeringly, headline CPI jumped by two percentage points in one month, making it a one-in-200 event (see chart)

The cost of living crisis continues to intensify at a worrying pace. Despite a very tight labour market, regular pay, which is growing at around 4.2%, is not keeping up with inflation. This means that in the absence of dipping into savings, households will be under pressure to cut back or reallocate spending. Inevitably, cut-backs in household spending will have consequences to businesses and the wider economy as it is the largest driver of economic growth. 

The cost of living crisis is yet to peak. Our in-house model still suggests an additional increase in the energy price cap by around one third in October which, at worst, makes it more likely the inflation peaks in the fourth quarter this year.

Source: PwC analysis of ONS data

 

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