Controversies around inflation measurement: Have annual real wages fallen by £2,100 or £1,200 or £800?

via Touchstone Blog from the TUC by Geoff Tily in Economics

Whatever way you look at it, this week’s [week of 22 March] inflation figures illustrate the threat to living standards that result from the fall in sterling after the referendum.Whatever way you look at it, this week’s inflation figures illustrate the threat to living standards that result from the fall in sterling after the referendum.

Headline inflation in February rose to 2.3%. Last week’s average earnings data for January (regular pay) was 2.3%. Real earnings growth is therefore zero. If as is likely inflation continues to rise and earnings growth continues to fall, once more pay growth will fall behind rises in the costs of living. ‘Once more’, because of course ever since the financial crisis this has been the norm.

But the story is complicated by the ONS leading on a new measure of ‘CPIH’ inflation rather than CPI inflation.

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