Inflation down to 3% – hold the party

INFLATION CAME DOWN to 3% in December, according to figures just released by the Office of National Statistics. It could be worse – but this is not enough to see Theresa May dancing a jig in her Downing Street office.

Inflation had been 3.1% in November – so the main news is that it is still high. Goods and services cost, on average, 3% more than last year – and that’s still bad news for most workers, who have not seen pay rises of this order, and those on fixed incomes.

The high rate of inflation keeps domestic spending down. This is very bad news for those trying to run the UK economy – because they are relying on domestic spending to make the economy grow.

The Bank of England is putting on a fairly convincing show of confidence. Although it is too soon to say that this small decrease is the start of a longer term downward trend, the Bank is saying that inflation will come down to 2% this year. This may be wishful thinking rather than scientific forecast.

There are still long term problems with the UK economy, which is still trying to recover from the 2008 global crash – including low productivity and uncertainty over Brexit.

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