Low inflation is good, but there's still stuff to do
Posted on 15 April 2014
The continued fall in inflation is being hailed as good news by government ministers and UK industry alike.
It has not only fallen to its lowest level since October 2009 but also for the sixth consecutive month, suggesting a positive trend that looks set to continue.
Some observers are picking up on the point that real wages growth is now on the verge of outstripping the cost of living.
While many people have yet to feel the warm glow of the economic turnaround new ‘wages versus inflation’ data, out tomorrow, will doubtless lead to the government highlighting the positive aspects of its austerity policies and pressing the need for further vigilance in keeping spending down and allowing the private sector to continue to pick up the slack.
Of course the question ‘when will interest rates rise?’ is one many people, not least those currently taking on mortgages, are starting to ask.
The picture of the national housing market is still mixed, but in London – to use the vernacular of some living on the south side of the River Thames – prices are ‘bonkers’.
True, a booming housing market makes some people, mainly government spin doctors, feel that things are definitely getting better.
But as much as house prices are deemed by some to be a good barometer for one’s economic fortunes personally I’d prefer to see more of this ‘rebalancing of the economy’ that we’ve all heard about for the last four years.
Lower inflation is of course a good thing. With relatively lower commodity and other input prices and low inflation UK businesses should be able to compete better than had been the case before.
The government needs to do more for UK manufacturing.
Sure, the recent Budget was a start. And low inflation proves that the government is getting something right – or at the very least that it is the recipient of good fortune and timing.
But while this is all good stuff the serious business of improving the country’s manufacturing fortunes remains a work in progress.
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