Bank of England policymakers have been confronted by contrasting data on inflation and jobs that will add a further challenge to deciding the direction of interest rates.
Food price inflation in the UK has soared to a 17-month high of 4.2% this month from 4% in July, according to the British Retail Consortium (BRC) and NielsenQ (NIQ).
The Bank fears the contagious effect of this trend amid concerns that food price inflation, affecting “staple” items such as eggs and butter, could exceed 5% in the coming months.
Helen Dickinson, chief executive of the BRC, said higher prices were partly a result of retailers passing on the Chancellor’s tax increases.
David Lonsdale, director of the Scottish Retail Consortium, said: “It’s crucial that governments in their upcoming fiscal announcements don’t add to the tax burden on retailers.”
Earlier this month the Bank’s monetary policy committee narrowly voted to cut interest rates to 4% to help stimulate the economy but warned that food price inflation but has expressed concern over food inflation which could hold back further rate cuts.
However, the economy is still demanding more help and new data from jobs search engine Adzuna showed vacancies for entry-level jobs in the UK have dropped to their lowest level in five years, down 1.24% in the three months to July to 865,000. This reverses gains made in the previous three-month period.
Salaries for listed jobs also dipped by 0.3%, another indication of a slowing labour market where the supply of workers is outstripping demand. Adzuna said there is an average of almost two jobseekers for every vacancy.
Anecdotal evidence points to employers cutting employees’ hours, freezing hiring, and offshoring jobs in order to avoid the higher national insurance contributions and the hike in the living wage.
Adzuna’s survey found that contract work has risen by 22% since April, with more firms preferring to hire workers on flexible rather than permanent contracts.
The Chancellor raised employers’ national insurance contributions and lowered the threshold for the tax so that it applies to lower-paid workers. The national living wage was also increased on 1 April.
The latest data follows a warning from the hospitality industry on Monday that it was bearing the brunt of “staggering’’ job losses from last year’s budget.
#Bank #dilemma #food #prices #surge #jobs #dip #Daily #Business