Chancellor to receive state of economy news in week before budget

Data expected to show rising inflation, falling real pay despite record employment, and first annual drop in retail sales in almost five years

The chancellor, Philip Hammond, is to receive some crucial evidence about the health of the UK economy this week as he puts the finishing touches to one of the most difficult budgets in recent times.

Official figures are expected to show the squeeze on household finances has intensified in recent weeks, as wage growth fails to keep pace with inflation despite low unemployment.

Inflation is when prices rise. Deflation is the opposite - price decreases over time - but inflation is far more common.