UK inflation expected to fall back to official 2% target – business live

Unsecured household debt is set to rise by more than £1,600 this year as families continue to struggle with the cost of living crisis, according to new TUC analysis.

Unsecured debt (loans, credit cards, purchase hire agreements) is on course to increase by 9.4% in real terms (adjusted for inflation), on average, per household this year. Over a quarter of people say they have taken out loans or borrowed on credit cards to cover unexpected bills since the start of the year.

The TUC says that this is the largest annual rise – in cash terms – since records began in 1987. The union body says the findings make a mockery of government claims that “their plan is working”.

The analysis excludes student loans.

Separate TUC polling, carried out by YouGov, shows that millions are continuing to struggle with the cost of living:

• 4 in 10 (42%) say they’ve cut back on essentials like food and utility spending this year. And this number rises to nearly 1 in 2 (47%) for women.

• 6 in 10 (60%) say they have cut back on non-essential spending like dining out and entertainment since the beginning of the year.

• Nearly a fifth (19%) of respondents say they have fallen behind on household bills this year – a number that rises to over 1 in 4 (28%) for people aged 18-24.

• Over quarter (27%) say have they taken out debt (loans, credit) to cover unexpected bills since the start of the year. This number shoots up to over a third (37%) for adults aged 25-49 – when lots of families raise children.

UK workers are on course for nearly two decades of lost living standards, with real wages not forecast to recover to their 2008 level until 2026.

The TUC estimates that the average worker would be £14,700 better off if their pay had grown at the same pace as pre-financial crisis real wage growth trends since 2008.

Its general secretary Paul Nowak said:

These findings show out of touch this Conservative government is with people’s struggles. While the Tories boast about their plan working, households across Britain are being pushed further into debt.

No one should have to rely on credit cards and loans to make ends meet. But after 14 years of flatlining wages – and the worst cost of living crisis in generations – many families are at breaking point.

The Tories economic record speaks for itself. Pay packets are still worth less today than in 2008 with working people on course to end this parliament poorer than at the start.

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

It’s UK inflation day!

In just a few minutes, we will find out whether inflation across the country has continued to slow, to the official target of 2%.

Economists are predicting that the headline annual rate fell to 2% in May from 2.3% in April, partly because of lower energy prices. That was the lowest rate in almost three years, although the decline was smaller than expected, and dashed hopes of an early interest rate cut.

The Bank of England is mandated by the government to keep consumer price inflation at an annual rate of 2%. The figures are released at 7am BST by the Office for National Statistics.

Core inflation which excludes food, energy, alcohol and tobacco, as they tend to be volatile, is forecast to have fallen to 3.5% from 3.9%. The central bank will keep a close eye on the services inflation number, which remained at 5.9% in April.

Investec economist Sandra Horsfield said:

UK inflation has certainly come a long way since the monetary policy committee (MPC) last hiked rates in August: the latest consumer price index (CPI) outturn the MPC faced at that time was for June 2023, when headline inflation was 7.9% year-on-year and core inflation 6.9%. By April 2024, the corresponding rates reached 2.3% and 3.9%, respectively.

We see a number of factors as likely to have pulled down inflation. One is that goods price inflation remains on a downward trend: lower energy prices are still gradually filtering through supply chains, and import prices are falling as China leans on manufacturing exports as an engine of growth. On the services side, wages continue to add to firms’ costs; but even there, the trend in wage growth is downwards, if only moderately. This should have added up to a lower rate of ‘core’ inflation.

We will also get producer price figures, which measure factory gate inflation – this eventually feeds into consumer price rises.

The Agenda