Inflation continues downward trend – business industry reaction

17th April 2024

Latest ONS data has found that inflation came in at 3.2% in March, slightly less of a drop than economists had forecast.

The rate is at it’s the lowest in two and a half years, and well down from the peak at 11.1% in October last year.

The biggest factor pushing inflation down was food, and the biggest push in the opposite direction came at the petrol pumps. Core CPI inflation (stripping out energy, food, alcohol and tobacco) was 4.2%, down from 4.5% in February. The CPI services rate also fell, to 6% – down from 6.1%.

Commenting on March’s inflation figures, ONS Chief Economist Grant Fitzner said “Inflation eased slightly in March to its lowest annual rate for two and a half years. Once again, food prices were the main reason for the fall, with prices rising by less than we saw a year ago.

“Similarly to last month, we saw a partial offset from rising fuel prices.”

Tina McKenzie, Policy Chair, Federation of Small Businesses (FSB) said “March’s fall in the annual consumer price inflation rate takes some more of the heat out of rising prices for small businesses. It’s difficult to overstate the toll that the cost of doing business crisis exacted on small firms, so further signs that its worst effects are firmly behind us are very welcome.

“Small business owners know all too well that they can never be complacent, especially in an economic situation characterised by sluggish growth and rising unemployment. However, there are some early indications that small business confidence levels are recovering, which – if it translates into investment and expansion plans being put into action by small firms – is good news for our economic growth prospects.

“Small firms will now turn their eyes and their hopes to the Bank of England, and will hope that the base rate cut many have been eagerly awaiting arrives sooner rather than later. We don’t want to risk stifling the small upward movement in GDP recorded in the first two months of this year.

“We’re calling again for the Government and for politicians of all stripes to think very hard about how they can best support small business growth, to provide the best possible platform for entrepreneurs to start up new ventures, and for existing businesses to expand and thrive.

“Small business owners will be watching carefully to see what is being proposed to help them in this election year. Policies which are targeted at helping small businesses to grow, take on staff, and innovate are needed, so that green shoots can take root and flourish.”

Dr. Roger Barker, Director of Policy at the Institute of Directors, said “March’s inflation data confirmed that the headline inflation rate continues to fall, although perhaps less decisively than some might have expected. Although inflation in the goods sector is now running at very low rates (0.8%), service sector inflation remains stubbornly high (6.0%).

“This month’s figures revealed a significant decline in food and clothing inflation. However, inflationary pressures in sectors like alcohol and tobacco, communication and health actually increased.

“The latest data remains consistent with the prevailing narrative of gradually declining inflation towards the Bank of England’s 2% target. There is still some way to go before inflationary pressures are squeezed out of some sectors of the economy. Nonetheless, the trend is clear and the case for a cut in Bank Rate by the Bank of England at the next meeting of the Monetary Policy Committee on 9 May remains intact.”