People in Britain have been struggling with the rising cost of living for some time. In August, the situation worsened when fuel prices shot up faster than wages, meaning that people are feeling the pinch more than ever.
Over the summer, motorists have been enjoying lower fuel prices. These falling prices have been keeping inflation down, which has offset the rising cost of food and clothing. However, August saw petrol and diesel prices on the rise again. This meant that inflation increased from 2.6% to 2.9% in the last month, which is higher than the predicted jump to 2.8%.
Economists have suggested that this rise in inflation could be partly due to retailers increasing their prices as a result of the value of the pound decreasing following the Brexit vote. This is because import and export costs have increased. The price of transportation has also shot up, due to the growth in fuel costs.
Some of the numbers that have come out of the latest inflation figures make for grim reading:
- Petrol – up 5.1%
- Coffee – up 5.1%
- Clothes – up 5.1%
- Oils and fats – up 5.9%
- Electricity – up 9%
- Fish – up 9.6%
The costs of airfares, second hand cars, toys and games have fallen in price, which has brought the inflation average down to 2.9%. However, these are less likely to be items that you would find yourself purchasing on a regular basis, meaning that families’ regular monthly budgets are likely to feel particularly hard hit.
The real cost of driving to work
The figures have also revealed that driving to work now costs people 5% more year on year. However, wage increases are not keeping up – the value of real wages is actually falling. This may seem surprising given the fall of the unemployment rate to 4.3%, the lowest it has been in over four decades, but it seems that many are not getting paid in line with the cost of living, as often the jobs are both low skilled and low paid.
(Credit – Pixabay)
Another reason why the wage increase may be being suppressed is because of companies like Amazon, Uber, and Netflix. These have disrupted the way that these particular industries traditionally work, and this has had an effect on the way in which people are paid.
2.9% is the joint highest that inflation has been in the past five years, and the Bank of England expects that it may rise to 3% in October. Wages have only risen by 2.1% over the past year. This means that people have less to spend each month. That’s why many are finding it difficult to afford everything that they need in order to live a comfortable life.
The future of fuel prices
The price of petrol is a strong indicator of whether inflation will rise or fall. As such, it’s worth using the PetrolPrices app to keep your eye on the price at the pumps. This can give an indication of how prices for other items will be changing too, not just the cost of what you’re putting into your tank.
Predictions suggest that people will continue to struggle with the cost of living for the next few quarters, but that wages will start to overtake inflation next year. This is because it is expected that the impact of the recent failure of the pound will start to fade, providing relief for cash-strapped drivers and families up and down the country.
Have you noticed the rising price of fuel biting into your budget? Do you believe that wages will finally overtake inflation in 2018? Share your thoughts via the comments section below.