UK inflation tipped to rise again with wages forecast to stagnate | Business

The squeeze on cash-strapped British households is expected to be illustrated this week byofficial figures likely to show that inflation picked up last month, outstripping growth in pay packets.

City economists are forecasting that the consumer price index (CPI) rose at an annual rate of 2.7% in July, up from 2.6% in June. The figures will be released by the Office for National Statistics (ONS) on Tuesday, followed by labour market data the next day which are expected to show wage growth stagnated while unemployment continued to fall.

Inflation is expected to resume its upward path following June’s surprise slowdown, when weaker global oil prices pushed down the cost of petrol and diesel, providing some respite for consumers. However, in May, inflation had hit a four-year high of 2.9%.

Coupled with low pay growth, the rising cost of living means real wages are falling, heaping pressure on households. Consumers are using their credit cards to fund spending and the Bank of England has expressed alarm about the increase in personal debt.

Tuesday’s update from the ONS will bring important news for commuters because July’s retail price index (RPI) will be used to calculate rail fares for the year ahead. RPI, a separate inflation measure, is expected to have risen at an annual rate of 3.5% in July, the same rate as in June.

Inflation has remained well above the Bank of England’s 2% target – measured against CPI – after starting to rise last year following the Brexit vote, which triggered a sharp drop in the value of the pound and pushed up the cost of goods imported from abroad. Inflation was just 0.3% in May 2016, a month before the referendum.

Analysts are pointing to higher utility prices in July, following gas and electricity tariff hikes by EDF in late June, while food and furniture prices have risen steadily on the back of the fall in sterling.

Philip Shaw, the chief economist at Investec, pointed to a further fall in petrol prices and the…

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