Belfast Telegraph

Alarm bells sounded on prices

 

By Margaret Canning

Economic growth will slow in the coming months as rising prices start to hit consumer spending, it's been claimed. And Ulster Bank chief economist Richard Ramsey said March's unchanged 2.3% rate of inflation concealed alarming trends in the prices of goods and services.

He said over the next few months "rising inflationary pressures will increase the gradient on the economic growth treadmill".

Danske Bank economist Conor Lambe said rising prices would hit pockets - and businesses.

"Higher inflation will put pressure on real wage growth and household budgets and will likely squeeze consumer spending.

"The impact of this is expected to be felt most by businesses whose revenue is drawn from discretionary consumer spending, including some retailers, restaurants and hotels."

The Office for National Statistics (ONS) announced the Consumer Price Index (CPI) measure of inflation stood at 2.3% last month. The biggest price rise came from food and non-alcoholic drinks, which reached its highest level for three years at 1.2% for the 12 months to March.

Food alone climbed 0.6% between February and March, with pricier margarine and crisps pushing costs higher.

Clothing and footwear price tags were also on the rise, climbing by 2% over the period in contrast to a 1% jump last year.

The downward pressure on the cost of living came from air fares, which fell by 3.9% between February and March after lifting by 22.9% in 2016.

Mr Ramsey said goods inflation had been accelerating fast over the last five months, and reached 2.5% year-on-year during March - the highest rate since June 2013.

He said it was the first time in nearly five years that the price increases for consumer goods were higher than consumer services, at 2.1%. "This reflects the depreciation of sterling feeding through into higher import costs, eg food and fuel."

He said the slowdown in consumer services inflation had been helped by this year's later Easter.

Hotel and airline fares had been higher in March 2016 due to the timing of Easter at the end of the month - so that instead, prices would be higher in April.

"Prepare for UK CPI to move significantly higher in the months ahead," he added.

The fall in petrol and diesel prices in recent weeks had led to an easing in transport fuels price inflation from 19.4% year-on-year to 17% in March.

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