FALLING INFLATION WILL EASE PRESSURES ON BUSINESS SAY BCC
July 6 2012.


Commenting on the producer price figures for June 2012, David Kern, Chief Economist at the British Chambers of Commerce (BCC), said: "The decline in producer price inflation shows that both output and input measures are at their lowest levels since 2009. These figures indicate consumer price inflation is likely to continue falling over the next few months, which will ease pressures facing businesses and individuals and boost consumer spending.

"In the face of tough fiscal austerity at home and difficult problems in the eurozone, falling inflation is the most important single factor underpinning demand in the UK. Nothing should be done to limit the fall in inflation, and the MPC should not use quantitative easing to try and prevent inflation falling below its target. In recent years inflation has been consistently above target and this has dampened economic activity. It is not certain that inflation will fall below target, but if this happened for a short period it would be welcome.

"Meanwhile, the economic situation remains difficult. While the government perseveres with its deficit reduction plan, it should act forcefully to reallocate priorities towards growth. This means more deregulation, supporting business lending and moving towards the creation of a business bank."


- Annual producer output inflation down from 2.9% in May to 2.3% in June; annual producer input inflation down from nil in May to -2.3% in June.