Inflation set to ease
Jan 13 2012
2012 could see inflation kept under control
Easing inflationary pressures may help prevent the UK from falling back into recession, despite lowered revenue expectations, research finds.
BDO’s Output Index dropped for the seventh consecutive month to 91.4 in December, from 92.5 in November. The Index, which measures turnover expectations three months ahead, has now remained below the crucial 95.0 mark that indicates growth since July 2011.
However, while the outlook is gloomy, the accountancy firm's Inflation Index came down for the fifth consecutive month.
The decrease in the Inflation Index is welcome news for consumers, who are expected to feel less of a squeeze in 2012.
Peter Hemington, partner at BDO LLP says, ‘As our data shows, there are areas for optimism in the year ahead but it is apparent that the UK economy has reached a crunch point. The government must respond decisively if the UK is to avoid a period of prolonged contraction.'
BDO urges the Bank of England to consider a further round of quantitative easing, and also wants to see the banks continue to step up their lending to UK businesses.
Hemington also wants to see the government introducing measures in 2012 that encourage private sector investment in infrastructure. He adds, 'We welcome the investment in high-speed railways, but want to see more immediate measures introduced – 2026 is a long way off. And we remain of the view that the government’s attempts to rein in current spending have given it the credibility to be bolder in borrowing more to finance infrastructure spending.'
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