THE squeeze on household finances is starting to ease, with inflation falling and wages rising, according to data due out this week from the Office for National Statistics.
On Tuesday the ONS is tipped to say that inflation, as measured by the Consumer Prices Index, fell from 3 per cent to 2.8 per cent in February.
The following day, City economists believe it will say average earnings over the three months to the end of January rose by 2.6 per cent, compared to 2.5 per cent for the three months to December 31.
Investec economist Victoria Clarke said: “The squeeze is starting to ease, as we have a moderation in inflation and improving average wage growth, and that’s likely to be the story for the year.
“We’re looking for a step down in inflation and for it to continue to moderate rapidly for the rest of the year. Some of the effects of the big devaluation of sterling and imported inflation are starting to fade.
“We also have upside momentum to pay growth because of the tight employment market.”
Pantheon Macroeconomics chief UK economist Samuel Tombs agreed and said: “It should be good news for consumers, as we have CPI inflation down to 2.8 per cent, it has peaked and is on the way down.
“The currency effect on inflation is fading, last year retailers had to push through price increases because of the fall of the pound, same with fuel costs.
“With wages, the surveys suggest that the risk is on the upside, while workers’ bargaining power has increased as firms are complaining that they cannot find people.”
Simon Ward, however, chief economist at investment giant Janus Henderson, urged caution.
“Things are still pretty grim, but they are moving in the right direction,“ he said.
“It’s too early to call an end to the squeeze because I expect inflation to be quite sticky. I expect it to be 2.5 per cent by the end of the year and for wages to increase slowly and only cross over in the autumn.”
The ONS is also expected to say on Wednesday that the unemployment rate held steady at 4.4 per cent in January and that the Government borrowed £2billion from bond market investors in February.
That would be a marked reversal from the £10billion surplus that the Exchequer registered in February last year, which was driven by a surge in self-assessment tax receipts.
On Thursday, it is thought that the Bank of England’s Monetary Policy Committee will vote to keep the base rate at 0.5 per cent, but signal in its meeting minutes that they are likely to hike it in May.
Small businesses in rural parts of the country will grow faster than their counterparts in urban areas, according to research from Amazon.
It said that rural small to medium sized enterprises (SMEs) are forecast to enjoy revenue growth of 0.7 per cent in 2018, compared to 0.6 per cent for SMEs based in towns and cities.
Profits were also tipped to grow at a faster pace, up 1 per cent compared to 0.8 per cent for their urban equivalent.
