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Families told to expect price rises as wages fall behind

Tim Wallace
Food prices are rising as the weak pound pushes up import costs - Paul Grover

Families are braced for another financial squeeze as official figures published this Tuesday are set to show inflation is mounting once more.

Price rises slowed in June and lower petrol prices restrained inflation. But economists believe pressures are rising again, predicting inflation edged up from 2.6pc in June to 2.7pc in the 12 months to July – and the surge in costs is set to continue.

The rising cost of foreign holidays due to the fall in the pound is one factor as is food inflation. “We view [June’s dip] as a temporary pause in the upwards trend, rather than the beginning of a downwards glide-path for inflation,” said Alan Clarke, economist at Scotiabank, who predicts inflation of 2.8pc in July.

He expects prices will rise further over the rest of the year: “The peak in inflation is yet to be reached. Indeed, the Bank of England’s updated projection sees consumer price inflation reaching a peak of 3pc year on year in October. While our forecast is fractionally higher than the Bank’s, we appear to be in good company.”

At the same time economists do not expect to see any signs of rising wage growth in June, predicting an increase of 1.8pc in numbers out on Wednesday – meaning earnings are falling further behind prices.

However, economists expect employment to keep on rising as companies continue hiring staff. On average they anticipate an 85,000 rise in employment with the jobless rate holding steady at 4.5pc, the lowest since 1975.