**Darren Winder** Partner, Lazarus Economics
Inflation has returned, well above forecasts. It is turning into a significant headwind. But are there mitigating factors that will help to see us through the ‘cost-of-living’ crisis?
Consumers and companies both built up significant savings through the Covid-19 lockdowns. The banks have a surplus of deposits, keeping interest rates low while credit conditions remain supportive. Long queues at airports are one sign of excess consumer demand.
The government is keenly aware of the need to help. They have already moved to provide help with fuel bills. Should conditions deteriorate, they may well step in again.
Growth has been weak, but these are short-term figures. There is evidence of people returning to the labour market, motivated by the higher cost of living but also by higher earnings. The UK wage bill is £1 trillion a year. A 5% increase is £5 billion.
Consumer confidence is ebbing but spending is high. This is reflected in tax receipts at the Treasury, which are at substantial highs. Don’t listen to what they say. Look at what they do.
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