A fall in inflation to its lowest level in nearly two years should ease the squeeze on spending and encourage economic growth, Greater Birmingham business leaders have said.
The Consumer Prices Index (CPI) measure of inflation was 2.1 per cent in December 2018, down by 0.2 per cent from November 2018.
The figure was pushed down by falling fuel prices and the cost of air fares, which rose between November and December but by less than the previous year.
It is now close to the Bank of England’s two per cent target and may mean the Bank is less likely to consider any rate rises in the near future.
Inflation is being outstripped by average UK pay growth, with the most recent available figures showing that wages excluding bonuses were up by 3.3 per cent for the three months to October 2018.
Greater Birmingham Chambers of Commerce chief executive Paul Faulkner (pictured) said: “It was pleasing to see the rate of inflation fall to the lowest level we’ve since the start of 2017 as oil price pressures seemed to have filtered through the system and brought us closer to the Bank of England’s self-imposed target of 2 per cent.
“Today’s results will no doubt please Governor Carney as the likelihood is that the MPC will have more scope to consider the feasibility of future rate rises in light of the continued uncertainty that surrounds Brexit negotiations.
“Coupled with recent pay rises, we are hopeful that this will ease the squeeze on household spending and encourage consumers to spend more in a bid to drive economic growth.
“However, the fact remains that cost pressures remain alarmingly high for the majority of businesses across the region – a trend clearly reflected in the findings of our latest Quarterly Business Report.
“Regardless of the outcome of the Brexit process, the Government shouldn’t lose sight of the importance of strengthening the competitiveness of the domestic economy – in particular reforming the business taxation system to reduce company costs and to actually encourage firms to invest in their people and products to fulfil their potential.”
Click here for QBR report.