Ruth Mitchell

Inflation hits 3 year high of 5.2%

The Consumer Price Index has risen to a 3 year high of 5.2%, further highlighting the bleak economic outlook.

In August the figure sat at 4.5%, but the revised inflation figures will add to increasing fears of high unemployment, anaemic growth and global financial instability.

However, Gary Stockdale from Vertem Asset Management believes that the

“Whilst September’s annualised CPI figure of 5.2% appears to be excessively high, it is likely to peak at these levels. As we move into 2012, the earlier impact of the VAT increase will phase out of the figures.

“In addition, many commodity prices have started to soften recently, examples of this being Cotton, Wheat and Oil, which have contributed to high levels of inflation in clothing, food and fuel respectively.

“We expect CPI to trend down to around 2.5-3% in the next 6 months.”

NECC Chief Executive, James Ramsbotham is in agreement that this evidence shows UK inflation is reaching its peak.

He said:“Although the increase to a high of 5.2% is larger than expected, it is in line with Bank of England predictions.

“Another hike in energy prices - the biggest growing concern cited by NECC members - was the main factor for today’s increase and lends more weight to the argument that the Government must give greater support to companies wanting to invest in energy efficiency measures. And while high inflation remains worrying, it should not have any impact on monetary policy for the foreseeable future.”

Chief economist form the Institute of Directors Graeme Leach is now looking forward to the inflation outlook for the next two years.

He commented“ “Hard though it is for many to believe, without QE2 the UK was facing deflation by 2013 because of the weakness of the money supply.

“Today’s figures in no way undermine the MPC’s decision to launch QE2 – don’t forget that in 2008/9 inflation fell from 5% to 1% in just 12 months.

Many, including Ted Salmon from the North East branch of the Federation of Small Businesses have attributed the increase to rising energy prices, which he believes have hit many small business owners and hope workers especially hard.

He added: “The Government wants small businesses to pick up the slack in the economy and wants people being made redundant to consider starting up in business, yet many of these smaller businesses are necessarily home based so such increases have a direct impact on their running costs.


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