This week has seen the release of the latest figures from the Office of National Statistics covering inflation and the labour market. The Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month inflation rate was 2.2% in September 2018, down from 2.4% in August 2018. The largest downward contribution came from food and non-alcoholic beverages where prices fell between August and September 2018 but rose between the same two months a year ago.
Estimates from the Labour Force Survey show that, between March to May 2018 and June to August 2018, the number of people in work was little changed, the number of unemployed people decreased but the number of people aged from 16 to 64 years not working and not seeking or available to work (economically inactive) increased.
Commenting on the inflation statistics for September 2018, Suren Thiru, Head of Economics at the British Chambers of Commerce (BCC), said:
“Inflation’s trajectory is likely to fluctuate somewhat over the coming months as downward momentum from a more subdued economy trades off against upward pressure from the persistent weakness in sterling. The pick-up in producer prices indicates that there are still substantial supply chain price pressures. Businesses continue to report that the cost of imported raw materials remain significant, which could increase consumer prices again in the short-term as these high input costs pass through supply chains.
“Inflation’s path back to the Bank of England’s 2% inflation target is likely to be slow. We currently expect that inflation will not return back to target until the end of 2019. However, with the upward pressure on inflation largely temporary, there remains sufficient scope to keep interest rates on hold for some time, particularly during this period of heightened uncertainty.
On the labour market figures for October:
“With UK employment high by historic standards and unemployment continuing to fall, the latest figures paint a positive picture of the UK jobs market.
“While wage growth increased again, the pace at which pay growth is exceeding price growth remains well below the historic average, meaning the current squeeze on spending power is unlikely to ease. Achieving a meaningful improvement in wage growth will be an uphill struggle unless the underlying issues that continue to limit pay settlements are tackled – notably sluggish productivity, considerable underemployment and high upfront costs for businesses.
“The number of job vacancies is close to an all-time high, providing further evidence of the worrying skills shortages plaguing UK businesses. Firms are reporting that recruitment difficulties have reached critical levels, which coupled with Brexit uncertainty is increasingly putting employers off trying to hire, and if sustained could increasingly weigh on jobs growth.
“Against this backdrop, the upcoming budget must be used to halt the alarmingly decline in apprenticeships, including scrapping the 10% co-investment apprenticeship contribution rule for small businesses, a key barrier to SMEs recruiting and training young apprentices. We also urge ministers to work closely with business to deliver a future migration system that enables access to the skills needed at all levels to help grow our economy.”