INFLATION

Inflation has hit its highest level in four years, adding to nervousness about a slowdown of the economy. A large part of the rise in prices is sterling having slid badly since the Brexit vote, the EU referendum coming up for its anniversary on Friday week.

The weak pound has pushed up the cost of raw materials and other input prices for UK companies. Part of this UK companies have absorbed through squeezed profit margins, but increasingly – particularly among some retailers – it is feeding through to high street inflation.

The Ofice for National Statistics (ONS) said yesterday that the Consumer Prices Index (CPI) reached 2.9 per cent in May. That threw many City economists as they had expected inflation to remain at the still high 2.7 per cent figure for April, with the latest number the highest since June 2013.

It means households and businesses are both feeling the pinch, as there is now a distinct gap between the cost of living and average wage growth of 2.1 per cent. Earnings data for the

0 Earnings growth, at 2.1%, now clearly trails the cost of living

RAJ BADIANI three months to April is due today, and it is unlikely the gloom will be lifted.

Why is this worrying? Because consumer spending, mainly through flashing the fantastic plastic, is what has kepttheukeconomicshowon the road in recent years. Business investment hasn’t rooted up any trees because companies are wary of what the Brexit negotiations will bring, particularly given the apparent lame duck premiership of chief negotiator Theresa May following the hung parliament that resulted from last week’s General Election. A desired landslide became political quicksand.

And, although Scottish exports are up by a quarter in the first three months of 2017, generally speaking UK exporters have not benefited massively from the weakness of sterling.

That leaves us dependent on a consumer base that looks increasingly under pressure. It is not as if most economists believe the Bank of England is poised to raise interest rates,

‘Thehigherukinflation rate is particularly disappointing following on from the country being one of the weakest growth performers’