The MPC begins its July meeting today, and data released this morning continues to reflect the mixed picture the committee has been dealing with for some time:
As I mentioned earlier, the KPMG/REC Report on Jobs showed that pay growth had only been marginal in June. Since the minutes from the last MPC meeting showed that they consider one of the primary upside risks for inflation to be expectations feeding through to wage and price-setting behaviour, this might suggest that there is nothing new for the MPC to worry about.
However, a report released by the British Retail Consortium today showed shop prices rising by 2.9% in the year to June, and that food price inflation was running at 5.7%, driven by surging world commodity prices. The squeeze on consumers therefore shows no sign of easing.
However, as I mentioned in a previous blog, consumers are not sitting by. Many are opting to buy cheaper products rather than reduce spending. Retailers are also making an effort to support consumers, for example, according to Tim Weber on twitter (@tim_weber):
“Waitrose CEO Mark Price says he "doesn't recognise" BRC inflation data. Food inflation is 3%, but offers/trading down reduce that to 2.1%”