How much is Britain’s inflation rate rising by?

How is the UK’s economic bounce back from the pandemic years going? Next week the Office for National Statistics will provide us with a host of new monthly data, including an economic growth and labour market update for the month of February and the headline inflation rate for March.

The inflation rate is the real kicker. While GDP and labour market headlines from February will allow us to further gauge how strong the economy was at the start of the year, March’s CPI rate will factor the impact of Russia’s invasion of Ukraine. This has undoubtedly had an impact on prices: the cost of energy, in particular. 

There’s little doubt that the inflation rate is going up again. But by how much? Over at Deutsche Bank, the research team is projecting the year-on-year CPI rate will rise significantly, from 5.5 per cent in February to 6.7 per cent in March (this projection lines up with the consensus too).

Meanwhile, Deutsche’s predictions for February GDP growth sit slightly above the consensus: at 0.3 per cent compared to 0.1 per cent. Still, even the Bank’s forecast is rather lacklustre, given 2022 was supposed to be the UK’s big year of economic revival. Deutsche’s yearly forecast for growth is still at 3.8 per cent, ‘​​sitting almost a full percentage point below consensus from late last year.’ 

Lower growth than predicted and higher inflation than politicians know how to handle both add to the dangerous recipe of ‘stagflation’. Yet the unemployment rate gives some cause for hope: with the headline rate already back to pre-pandemic level lows, the consensus remains that it will stay under four per cent in next week’s updates.

Monthly data, of course, can only tell a fraction of the story, and only so much can be gleaned about wider trends. But with economic growth for this year already forecast downward in the Spring Statement, and inflation on the rise for months now, next week’s data updates are likely to confirm what is already suspected by Deutsche and others: that our economic circumstances are likely to worsen before they improve.