Markit: Downward inflation trend has begun

Tuesday, 15 November 2011 11:01 AM

Markit's chief economist and director Chris Williamson gives his take on today's CPI inflation figure of 0.5%:

"Some welcome news at Threadneedle Street was provided by consumer price inflation falling from its three-year high of 5.2% in September to 5.0% in October, dropping more than expected (the consensus was 5.1%). Lower food and fuel prices were the principal factors helping the rate lower, although rising utility prices were a key cause of the rate remaining far above the Bank of England's 2% target.

"The easing in the rate of inflation marks the start of what is likely to be a downward trend, with a further marked easing in the rate likely in coming months as petrol price rises and January's VAT hike fall out of the year-on-year comparisons. The rate could well fall back to target in the next 12 months.

"Lower inflation should provide a boost to the fragile-looking economic recovery, as household spending has been hit in recent months by the squeeze to real incomes that has resulted from the combination of high prices and sluggish pay growth. However, it is difficult to believe that this will provide a sufficient stimulus to offset weak demand in export markets and demand-dampening austerity measures at home." 

Tags:
• economic recovery
,
• inflation