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City analysts today warned the government that the British economy is set to witness a recession which could last up to 18 months. Capital Economics predicts that the gross domestic product for the...
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Wednesday 9th July 2008
While in the wider market inflation may be nudging ever closer to 4%, the figure for year on year food price inflation has reached a staggering 7% with more and more retailers forced to pass on energy and transport cost rises to the consumer. Foods prices in June 2008 rose by 7% compared with June last year and with the price of oil set to move higher it seems that food price inflation may not yet have peaked!
The UK consumer is stuck between a classic pincer movement with retailer costs rising, the cost of living rising and wage inflation under the current rate of general inflation. In affect the cost of living is moving yet higher while the value of employment income is affectively being devalued. So what next? What is the solution?
At this moment in time there is no an easy solution although the further retailers stretch the consumer the more trouble in store in the future. There will come a point were consumers are just not able to continue with current spending habits and retailers will need to take the brunt of their cost rise pain. All in all it does not look to good for the UK economy or the UK consumer in the short to medium term. |
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