Living costs – Households on lowest incomes face most significant rise

Data published by economic forecasting group the EY Item Club has found that households on the lowest incomes in the UK face a rise in living costs of almost 10%.

The EY Item Club predicts that living costs for households on lower incomes will rise by 9.6%. The data suggested that inflation will adversely affect these households as they spend more on essentials and utilities.

In regard to rising levels of inflation, the Office for Budget Responsibility (OBR) recently said that real living standards are set to fall by 2.2% in 2022/23 and not recover to their pre-pandemic level until 2024/25.

Martin Beck, Chief Economic Adviser at the EY Item Club, said: ‘What happens further out will be heavily influenced by the geopolitical situation and its impact on commodity prices. Though there has been more encouraging news on wholesale gas prices, a further increase in the energy price cap in October still looks likely, while petrol prices are likely to be slow to fall back.

‘As such, the EY Item Club expects CPI inflation to average close to 7% this year, generating the biggest squeeze on household living costs for more than a decade.’

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