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 economists had been forecasting a third consecutive monthly rise.
The Office for National Statistics said: “The rate is still relatively low in the historic context although it is above the rates experienced in 2015 and early 2016.
“The main upward contributors to change in the rate were rising food prices and air fares, and a smaller fall in the price of motor fuels than a year ago.
“These upward pressures were 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.”
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.”
Inflation rate, January 2006 – August 2016:
