Inflation Curbs Consumer Purchasing Power

Posted - 28/10/10

A 'European Salary Increase Survey' has predicted that UK salaries will increase below the national inflation rate. With salaries predicted to rise by 2.5%, and inflation predicted to run at 3%, consumers will see a 0.5% decrease in their purchasing power in 2011. Which is a similar decrease experienced in 2009-2010.

Around twelve percent of employees experienced a pay freeze in 2010, which saw their purchasing power decrease by 3%. Forecasts predict that the number of pay freezes will remain the same, or fall in 2011. Purchasing power may not decrease on every type of product however.

The CPI inflation figure of 3%, is the average inflationary rate of all retail sectors. In 2010, we have seen huge price increases in commodities such as wheat and cotton. Therefore, the inflation of food has skewed the figures somewhat. Other items, such as clothes, have inflated at a lower rate of 0.9%.

Inflation figures for aftershave and fragrances have been hard to acquire. The probability is that it has risen in line with clothing. And, there is the distinct possibility it could have deflated in price. Due to it being a luxury, and not an essential, retailers are sometimes forced to lower prices to generate sales in recessionary periods.