Households face second year without improved living standards

Britain’s households will endure a second year without an improvement in their living standards in 2024 as the effects of high inflation take time to abate, the International Monetary Fund has revealed.

In its flagship World Economic Outlook (WEO), the Washington-based IMF said it was forecasting modest 0.5 per cent UK growth this year – but only as a result of a rising population.

Growth per head – one of the key measures of living standards – is expected to remain flat this year after a 0.3 per cent drop in 2023.

The IMF added that there would be a pick-up in the economy as 2024 wore on but it would not be until 2025 that the cost-of-living crisis would be over.

It stated, “Growth in the UK is projected to rise from an estimated 0.1 per cent in 2023 to 0.5 per cent in 2024, as the lagged negative effects of high energy prices wane, then to 1.5 per cent in 2025, as disinflation allows financial conditions to ease and real incomes to recover.”

The UK chancellor, Jeremy Hunt, said, “The IMF’s figures today show that the UK economy is turning a corner. Inflation in 2024 is predicted to be 1.2 per cent lower than before, and over the next six years we are projected to grow faster than large European economies such as Germany or France – both of which have had significantly larger downgrades to short-term growth than the UK.”

This comes as Consumer Prices Index dropped to 3.2 per cent in March, the lowest level since September 2021. Markets, however, had expected a rate of 3.1 percent in March. Inflation rose 3.4 percent in the 12 months to February, the ONS added in a statement.

“Inflation eased slightly in March to its lowest annual rate for two-and-a-half years,” ONS chief economist Grant Fitzner said. “Once again, food prices were the main reason for the fall, with prices rising by less than we saw a year ago. Similarly to last month, we saw a partial offset from rising fuel prices.”