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TUC: Economy is fragile

Sarah Davidson

February 17, 2015

CPI has fallen rapidly from 1.0% in November to 0.5% in December, while last week Bank of England Governor Mark Carney admitted deflation is ‘likely’ by spring.

O’Grady said: “Low inflation is a sign of fragility in both the UK and global economy.

“It’s a dangerous time for the Chancellor [George Osborne] to be proposing a new round of austerity, which will hold back growth.

“We need a strong and sustainable wages recovery, built not just on falling inflation, but on higher pay settlements and more decent, full-time jobs.”

Paul Hollingsworth, UK economist at Capital Economics, reckoned a brief period of deflation is ‘imminent’.

He said: “We still think that the UK will experience a brief period of deflation around March or April this year.

But he added: “With little sign that low inflation is becoming entrenched, though, the UK’s period of deflation should be of the ‘good’ sort.

“We have probably seen the full impact of lower oil prices on petrol prices, we have almost certainly not seen the full effect trickle down to other goods.”


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