Freeze in inflation won’t thaw underlying economic problems in Greater Birmingham

Business leaders in Greater Birmingham say a freeze in inflation should not deflect from underlying problems that exist in the economy.

The Consumer Price Index measure of inflation remained at 2.6% for the second consecutive month, despite forecasts that it would go up.

The same could not be said for the Retail Price Index, which rose to 3.6% – it highest level for five years.

The Office for National Statistics said the largest downward pressure on the CPI last month came from a fall in fuel prices.

This was offset by smaller upward contributions from a range of goods and services, including clothing, household goods, gas and electricity, and food and non-alcoholic beverages.

Greater Birmingham Chambers of Commerce chief executive Paul Faulkner said the CPI figures had confounded predictions.

“Much of this was down to a fall in petrol prices (a trend which started back in March) which countered upward pressure from increases to food, gas and electricity prices,” he said.

“The latest figures suggest that UK inflation might peak at a lower level than previously predicted and it remains to be seen whether these results will impact the Bank of England’s thinking around potentially raising interest rates in the near term.

“Despite the positive news, we shouldn’t lose sight of the fact that wage growth is still lagging behind the rate of inflation and this will continue to have an impact on consumer spending power, a key driver of economic growth in the UK.”

The chamber begins surveying for its latest Quarterly Business Report next week and Mr Faulkner said it would be interesting to see whether local businesses were still showing resilient levels of growth despite concerns around inflationary pressures and fluctuating exchange rates.