Newspaper article The Journal (Newcastle, England)

Focus Is on Spending Power This Christmas

Newspaper article The Journal (Newcastle, England)

Focus Is on Spending Power This Christmas

Article excerpt

Byline: FORECAST Iain Laing ? 0191 201 6429 ?

WITH few corporate updates expected this week, attention will switch to the economy and the spending power of consumers in the run-up to Christmas. Inflation is expected to dip in figures released tomorrow, but economists see it as a temporary reprieve as the cost of living is set to rise in the months ahead.

The consumer price index (CPI) is forecast to have fallen slightly to 2.6% in November, from 2.7% in October, in figures from the Office for National Statistics (ONS).

The impact of energy bill increases from supplier SSE will be offset by the effect of steeper utility bill rises in November last year, but with further hikes from other providers due in the months ahead, CPI inflation is predicted to peak at 3.5% by mid-2013. And in a busy week for economic releases, public finance figures are forecast to bring some cheer to the Chancellor and reveal a drop in borrowing in November, while retail sales for the same month will receive a pre-Christmas boost and rise by around 0.3%.

The rate of inflation unexpectedly shot up in October from a three-year low of 2.2% in September to 2.7%. A near trebling in university tuition fees and a hike in food prices were blamed for the increase, which was the biggest month-on-month jump in a year.

Looking ahead, economists expect the upward trend to continue after the slight moderation in November.

Victoria Clarke, economist at Investec, said: "The SSE bill hike alone implies a smaller monthly rise in overall gas and electricity prices than between the same two months a year ago, applying downward pressure to the 12-month rate of inflation. With few other sources of upward pressure, we expect to see CPI inflation notch down to 2.6%, before the uptrend resumes."

Resurgent inflation will come as a blow to pensioners and savers, who have seen their income hit hard by rock bottom interest rates. …

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