Inflation will jump next week. On Wednesday the ONS is likely to say that consumer price inflation in October rose to around 4.5 per cent, its highest rate for almost 10 years. This is due to higher energy prices, a rise in VAT on the hospitality trade, and to higher petrol prices. Further rises are likely in the next few months.
Price increases, however, are not being matched by wage increases. Tuesday’s data could show that annual growth in average weekly earnings fell in September to just over 4 per cent, an 11-month low. This will confirm that the high annual wage inflation seen in recent months was one-off – the result of weekly hours returning towards normal after last year’s lockdown was eased. In fact, the ONS is likely to say that, adjusted for inflation, wages have not increased at all since December. This would tell us that labour shortages are only localised and are not causing generalised wage inflation.
Unemployment data should corroborate this. Although these could show a drop in the official measure to below 1.5 million, this would still leave the rate above its pre-pandemic level. If we add in those outside the labour force who want a job (as we should) the jobless rate is around its pre-pandemic level. These numbers, however, refer to the period just before the ending of the furlough scheme; figures over the winter might therefore show rising unemployment.