Commenting on the inflation statistics for August 2018, published today by the Office for National Statistics, Suren Thiru, Head of Economics at the British Chambers of Commerce (BCC), said:
“Inflation surprisingly rose for the second successive month in August, largely wiping out the recent recovery in real wage growth and emphasising the continued squeeze on consumers.
“The strong growth in producer prices indicates that inflationary pressures further down the supply chain remain significant and could lift inflation higher in the coming months. However, the upward pressure on prices remains transitory, and inflation should resume its ease back towards target once the impact of the recent increase in oil prices drops out of the calculation.
“The possibility of a disorderly Brexit is the key risk to the UK’s outlook for inflation as it could result in a substantial decline in sterling, which could significantly increase inflation and exacerbate the financial squeeze on consumers and businesses.
“With UK economic conditions subdued, and little evidence that higher inflation is translating into materially stronger pay growth, the MPC has sufficient scope to opt for a prolonged period of monetary stability. Against a backdrop of significant political and economic uncertainty, more needs to be done to boost UK growth and productivity, including kickstarting business investment, through tackling the high upfront cost of doing business in the UK.”