IoD: Response to inflation figures for January 2018

Responding to official inflation figures, showing that the Consumer Price Index remained at 3.0% in January, Tej Parikh, Senior Economist at the Institute of Directors, said:

“We should not be discouraged by the fact that inflation didn’t fall as expected. Although it remains elevated, it is gradually creeping toward the edge of the plateau, and households and businesses can start to look forward to lower prices over the coming year.

“Whilst it’s clear that the inflationary momentum stemming from the weakened currency is on the wane, this month it was counteracted by upward pressure from a swathe of recreational activities.

“Food price increases – a key cost for households – appears to be slowing, and the Bank of England expects inflation to gradually slide back toward the 2.0% target. Meanwhile skills shortages and tightness in labour markets have the potential to push up wages, which will also help to ease the real pay squeeze. However, much will depend on businesses’ ability to invest in expanding their capacities to provide the headroom for higher salaries – and that remains heavily tied to uncertainty around Brexit.”