In a boost for the UK economy, it was announced this morning that inflation in the UK had fallen to 2% last month, which is now in line with the Bank of England’s target.
This is the lowest level of inflation since July 2021 and it has taken nearly three years to return to these levels. Remember when we were told it would be “transitory”?
Inflation falling relief
For added context, core inflation in the UK remained above 3%, but has been falling over time as well. Core inflation is items such as energy and food, which make up a lot of household spend.
However, the news that inflation has now fallen back to the target of 2% will be a relief for many. For years we have been talking about rising inflation and a cost of living crisis that has been crippling the ability for households to spend on discretionary and big-ticket items. Something which has hit the UK fenestration sector quite hard in the last year or two.
Now, with inflation back to where most of us were used to having it, this may provide some sort of comfort blanket to households that have spent a long time worrying about how they are going to make ends meet.
It is important to remember even at 2% prices are still rising, albeit far more slowly than they were 18 months ago. We are not in a deflationary period where you see prices actually fall. That rarely happens. And the Bank of England has forecast that inflation could rise again in the coming months. But, with wages rising at around 6%, that means that right now, people are earning more than prices are rising, which is starting to put money back in people’s pockets. That being said, with mortgage payments for around a million households set to rise significantly this year, the pressure on many households will remain in place.
Good news burst
Sometimes, even if things materially don’t change, a bit of good news can provide a bit of thrust in spending. The same can be said with a new Government. With Labour set to win by a massive majority, new rulers often enjoy what is known as a “bounce”. It is a sense of hope and change in the population that someone new can change the country. It can provide a bump upwards in the economy, even if it tends to be short-lived.
The news about the rate of inflation falling, and a change in Number 10 means that the summer months could see an improvement in circumstances for the UK economy as well as our own sector.
I have sensed some hesitation from the public after the first quarter. As it became clear the UK was going to go to the polls, activity appeared to wane significantly. This is often the case prior to major votes, and I remember the same thing happening in the weeks running up to the Brexit vote.
But as polling day approaches and it is becoming increasingly clear who is going to win, this last week or so I have seen an uptick in activity. It could be that this is down to local/regional variances in business demand, or people may be already starting to look past the election in the knowledge that they know who is going to win and are moving on with making decisions.
Either way, I am hoping for a bit of a summer boost to offset the difficulties the industry has faced in the first half of this year. How long it lasts into the year remains to be seen, and there are certainly risks which we must continue to navigate. But with falling inflation and a new face in power, there could be a bit of oomph restored just when we need it.
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