Credit, Collections & Insolvency News
The latest UK inflation data has shown that the rate has fallen less than expected and remains in double digits at 10.1 per cent in March, from 10.4% in February, according to the Office for National Statistics (ONS). The stubborn rate has been driven by food prices rising at their fastest rate for 45 years.
Reacting to the latest ONS inflation data for March, David Bharier, Head of Research at the BCC, said “Today’s CPI rate of 10.1% means that prices continue to rise at an alarming rate. Driven largely by housing and food costs, this is on top of an already high growth rate from this time last year.”
“More positively, today’s figures show that the Producer Price Index has eased to 7.6% from 12.8%, indicating the peak may have passed for input price growth. Our research shows that inflation is still by far and away the top concern for UK SMEs. This has been driven by three years of global lockdowns, supply chain crises, energy shocks, and new trade barriers with the EU.”
“Small businesses, particularly those in the retail and hospitality sector, have been the least able to absorb cost rises, and we see that most have not invested or grown. Businesses need to see a reduction in the cost and burden of exporting and importing, particularly with the EU, as well as increased support to deal with the unprecedented energy price shock.”
Kitty Ussher, Chief Economist at the Institute of Directors, said “Business remains extremely concerned by the rate of inflation and wants to see it under control. While it is a relief that the headline rate of inflation is now pointing downwards again, following the surprise rise last month, the Bank of England’s job is not yet done. The improvement this month is predominantly due to falling transport prices which, although welcome, hides an underlying stickiness in core inflation which at 6.2% has not yet started to fall. And food inflation is still rising – up from 18% to 19.1% in March.”
“Taken together with yesterday’s strong labour market data it is now clear that there is more demand in the economy than the Bank of England had expected in Q1.The headline rate will come down a notch in April as base effects from last year work their way through the data, but to address the underlying issues the MPC still needs to raise rates again when it meets in a few weeks’ time.”
Alpesh Paleja, CBI Lead Economist, said “February’s uptick in inflation proved to be short-lived, with the CPI rate having fallen back in March. Inflation should continue to fall over the rest of this year, thanks to lower energy prices and base effects unwinding. But with the CPI rate set to stay above the Bank of England’s target, this will still be a tough year for many households – in particular, the strength in food price inflation will continue to have a big impact on peoples’ pockets.”
“Monetary policy is now facing a renewed trade-off, with the inflation outlook looking more benign against the backdrop of some resilience in economic activity. With domestic price pressures still stubbornly strong, it’s plausible that the Bank of England will raise interest rates again at its May meeting. Nonetheless, we’re likely close to the peak in this rate-tightening cycle.”
Suren Thiru, Economics Director at ICAEW, said “Although still astronomical, this drop suggests inflation has resumed its descending trajectory with falling energy prices dragging down the headline rate.
March’s decline should be followed by a bigger drop in April due to strong base effects caused by the comparison with April 2022, when Ofgem increased the energy price cap by 54%.”
“While core inflation is likely to prove more stubborn, the squeeze on consumer demand from rising taxes and the lagged impact of raising interest rates should put it on course for a firm downward path by the Autumn.”
“This drop in inflation and the prospect of further falls may drive a bigger split in Monetary Policy Committee voting in May as concerns grow over a flatlining economy.”