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<p>Since mid-2021, UK inflation has been pushed higher by global pressures, such as
supply chain disruptions from Covid-19, and pressures following Russia’s war against
Ukraine. More recently, tightening in the labour market, rising wages and other input
prices for firms mean that domestic factors are playing a bigger role. As a result,
consumer price inflation was 10.5% in December 2022.</p><p> </p><p>Wages have also
grown but remain lower than current levels of inflation.</p><p>Total annual pay growth
increased to 6.4% in the three months to November 2022, significantly above pre-pandemic
average growth of 3.4% (2019 average).</p><p> </p><p>Below inflation wage growth has
led to a fall in real household disposable income. Latest data from the Office for
National Statistics (ONS) show real household disposable income decreased by 2.6%
on the year in Q3 2022. The OBR, in its November 2022 forecast, expected real household
disposable income to fall in 2022 and 2023, and start increasing from Q4 2023.</p>
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