Lalitha Try
@LalithaTry
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Economist at @resfoundation working on everything living standards, welfare and incomes
London, England
Joined June 2017
. and if you haven't seen the @resfoundation overnight budget response document yet, you can find it here
resolutionfoundation.org
This has been the most anticipated Budget of modern times. It had to wrestle with profound – and sometimes conflicting – challenges: fixing the strained public services; repairing failing public...
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Yesterday's budget was the biggest tax-raising budget on record - here are some of my charts putting it into context. .
Rachel Reeves’ first budget marked a significant tax-raising event. Tax rises immediately after an election are not unprecedented, but the net tax rise announced at this budget was of a scale we have not seen for many years.
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RT @zackleather: Poorer and younger households will be most impacted by the bus fare cap increasing to £3. The lowest income fifth take twi….
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RT @JMarshall_3: New @resfoundation report out today on how we can share the costs and benefits of decarbonising transport fairly . https:/….
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RT @matildakdavies: 🪩 PSA for anyone that likes to stay out past 2am. I've built maps to show you every pub, bar and club that's open un….
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RT @JamesSmithRF: This morning’s @ONS inflation data shows CPI was 2.2% in August, unchanged from July and in line with expectations. Detai….
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RT @resfoundation: 🚨 Opportunity alert! 📢. The Resolution Foundation is offering two paid training placements for recent graduates. https….
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RT @resolvepoverty: 📈 Following the General Election, living standards growth must be on the agenda for the new government. @LalithaTry, E….
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Overall then, the rise in headline inflation was smaller than expected, and the concentration of news in services is a positive sign for domestic price pressures easing. Combined with yesterday’s weak wage data, this boosts the chances of further rate cuts later this year.
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Services inflation affected higher-income households the most: as this chart shows, they spend a higher proportion of their total expenditure on services than lower-income households.
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Today’s surprise on services comes on the back of the Bank of England becoming more pessimistic on the pace at which services inflation will fall. It’s August forecast has services inflation falling more slowly than it thought earlier in the year.
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Services inflation was far lower than the Bank of England expected in its August forecast (5.6%). Fuels and lubricants inflation also came in surprisingly low, meaning today’s rise in headline inflation was 0.2ppts less than the Bank expected.
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This month saw a surprisingly large (and welcome) fall in services inflation, from 5.7% to 5.2%. Services inflation is still historically high but heading in the right direction.
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Core inflation (which excludes energy and food, among other things, and is a measure that shows how persistent inflation can be) has fallen slightly to 3.3%.
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Higher inflation doesn’t equal a return of the cost of living crisis – because it never went away. Prices have still risen significantly over the last few years: since July 2021, overall prices have risen by 20%, energy prices have risen by 42%, and food prices have risen by 31%.
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We’re now past the period of UK exceptionalism on inflation. Headline CPI inflation is in the middle of the pack for the G7, and lower than in the euro area.
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Fuel prices have been falling for a few months now, dragging down on inflation
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Contributions to the annual change look quite different to the monthly ones: inflation is now much more dominated in services rather than goods with restaurants and hotels pushing inflation up and household bills dragging down inflation as energy prices decline.
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The change in energy prices impacts the headline inflation rate. Housing and household services pushed up inflation by 0.5ppts from June to July.
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