"When we measure headline inflation, we average across all the different types of goods people buy. This is problematic since price inflation hits different items in different ways, and many frequent purchases are still relatively expensive. Even though our wages have grown faster than the prices of electronics and clothing, average incomes have not kept pace with the cost of essentials such as food and housing."
"If prices rise faster than wages, we feel the pinch as the cost of living rises. Price inflation shot up in the aftermath of the Covid pandemic, sharply eroding the spending power of our salaries. Wage inflation has now caught up with price inflation, with strong income growth for all but the very poorest. On paper, that should have eased the cost of living pressures for most people."
The economy faced multiple shocks including austerity, Brexit, the pandemic, and high energy prices, eroding early optimism. Price inflation surged after Covid, reducing real pay, but wage inflation has recently caught up for most households except the very poorest. Headline inflation averages mask wide variation across goods, so frequent purchases and essentials like food, housing and energy remain relatively expensive. Poorer households spend a larger share on these high-inflation items, making them disproportionately affected by price rises while also receiving weaker income gains. Asset measures such as the house-price-to-income ratio have risen sharply.
Read at www.theguardian.com
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