Inflation figures for August revealed

INFLATION remained unchanged in August, despite expectations the weaker pound would result in a rise, fuelling fears of a stagnating economy.

The TUC called the Government to bring forward major new infrastructure projects while analysts warned Philip Hammond will need to take action in his forthcoming Autumn Statement.

The Consumer Prices Index (CPI) stayed at 0.6%, its highest level since November 2014, although “still relatively low in the historic context” said the Office for Noational Statistics.

However Tom Stevenson, investment director at Fidelity International, still expects inflation rises in the months ahead.

He said: “While inflation has remained unchanged this month, the impact of currency changes works with a lag so further rises in CPI should be expected. 

“With fresh concerns being raised about growth prospects in the UK, the spectre of stagflation cannot be dismissed – something the Bank of England will be desperate to avoid. 

“So far the impact of Brexit has been muted but with the Bank almost out of ammunition, expect Mark Carney to be pushing for more support from the government in November’s Autumn Statement.”

TUC General Secretary Frances O’Grady also believes the Government must taken action, and called for it to give the go-ahead to major infrastructure projects.

She added: “The UK’s continuing low inflation – with the fall in the exchange rate not yet feeding into higher prices – is a sign that the economy is below full strength.

“The government must give the go-ahead for a third runway at Heathrow, bring forward major new infrastructure projects like high-speed rail and announce a big expansion in housebuilding.”

Rises in the costs of food and air fares were partly offset by falls in hotel accommodation prices, in addition to smaller rises in the prices of alcohol, and clothing and footwear than a year ago.

Commenting, Paul Faulkner, chief executive of the Greater Birmingham Chambers of Commmerce, said the Government should use the calmer economic climate to deliver clarity on major infrastructure projects and to develop its industrial strategy alongside the long-term rights of EU workers.

He said with the CPI Index remaining relatively low in August, consumers had yet to feel a major impact from the fall in the value of pound on the prices of imported goods.

By contrast, he said the Producer Price Index revealed that the price of materials imported by manufacturers had risen significantly on the year to August.

“We will be waiting to see whether these additional pressures eventually lead to increases in prices for consumers in coming months,” he said.

“While input prices for manufacturers are up significantly in the year to August, they only saw a slight rise compared to July as the pound has begun to settle into a ‘new normal’.

“We would urge the Government to make use of this period of relative calm before the activation of Article 50 to ‘put their house in order’ by renewing their commitment to major infrastructure projects, setting out the proposed industrial strategy for the UK and providing certainty for UK businesses on the long term residence rights of existing EU workers.”