UK inflation drops for third month

Small businesses are still concerned with the UK’s recovery as inflation continues to drop in July, official figures show.

The Office for National Statistics (ONS) released its latest figures showing a slowdown in inflation for the third consecutive month, leaving small businesses vulnerable.

The Consumer Prices Index (CPI) fell to 31% from 3.2% in June, while the Retail Price Index (RPI) showed a significant drop to 4.8% from 5%.

Despite figures remaining above the Bank of England’s 2% target, many are showing concern. The rate at which prices increase has been slowing for a couple of months which suggests recovery is stalling.

The British Chambers of Commerce (BCC) warns of the dangers of raising interest rates in reaction to the mulish inflation figures.

The BCC’s chief economist, David Kern, said:

“Headline CPI inflation fell slightly in July, which was in line with expectations, but it remains stubbornly high. Nevertheless, it would be wrong to overreact to these figures by raising interest rates or withdrawing the support provided by quantitative easing.”

“While the Monetary Policy Committee cannot ignore the risk that inflationary expectations might worsen, there is no sign of this happening at present.”

According to the Bank of England, the impact of the 1.5% VAT rise aimed at reducing the deficit, would keep inflation above next year’s target.