The double whammy of higher utility prices and the government’s new “health and social care levy” will reduce real household disposable incomes over the next year or so by £16.5bn, or 0.6% of GDP, compared to otherwise. By slowing real consumption growth, this risks setting back the economic recovery. While that may not prevent the Bank of England from raising interest rates in the first half of next year, it may mean that rates rise more slowly than investors currently expect.
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