11: GDP + Inflation = Stagflation

The fear that the UK could be entering a new age of stagflation is becoming a racing certainty. Stagflation of course is a toxic combination of stagnant growth and rapidly rising prices - and runs the risk of intensifying the current squeeze on living standards. 

Inflation in March climbed to 7%. The pickup in inflation is broad-based - unsurprisingly, Russia's invasion of Ukraine has intensified the problem by cranking up energy costs, but there is more to it than that. Food, eating out, clothing and furniture have all become more expensive in recent months. However, there is worse to come... when the April inflation figures are released next month they will include the 54% increase in the energy price cap – which alone will add about 1.8% to the annual inflation rate. 

UK average earnings (minus bonuses) increased 4.1% compared to 2021, but actually dropped 1.3% when adjusted for inflation. This is the sharpest fall since 2013 according to the ONS. Jobs growth does show signs of slowing as employers added 35,000 to payrolls in March, below most forecasts and the lowest number since February 2021.

Analysts have warned that this latest jobs data and the slow growth of the UK economy in February make stagflation a very possible, grim reality, for the UK...