Economic indicators appear to be showing promise, but be careful: falling inflation isn’t a win – it’s a warning sign.
Inflation has fallen — but there’s no reason to celebrate.
The latest figures from the Office for National Statistics show that price rises slowed to 2.6 per cent in March, down from 2.8 per cent in February.
Hailed as progress by government ministers, in reality, it looks far more like a signal that the economy is losing steam.
Buy Cruel Britannia in print here. Buy the Cruel Britannia ebook here. Or just click on the image!
Prices haven’t stopped rising — they’re just rising more slowly. The reason is that consumers and businesses alike are pulling back.
That’s not stability. That’s stagnation.
Demand is disappearing
One of the clearest signs is where prices have fallen.
Recreation and culture — including toys, games and hobbies — saw sharp drops. These are exactly the kinds of things people stop spending on when money is tight.
Petrol prices also fell, but this wasn’t the result of any domestic policy. It’s fallout from Donald Trump’s renewed trade wars. This means global demand for oil is down, pulling prices with it.
This isn’t the kind of inflation drop that signals economic strength.
It’s a sign of demand destruction — where households simply don’t have the disposable income to keep spending.
It’s the flipside of the cost-of-living crisis: people tightening their belts so much that it shows up in the national data.
Wage growth can’t keep up
Officially, wages are growing faster than inflation, with a 5.9 per cent increase over the year.
But rising taxes and higher living costs are eroding any real-world benefit. For many workers, more money on paper just means more money lost to rising National Insurance, or to higher prices at the till.
For businesses, the situation is just as strained.
Those facing increased staffing costs from minimum wage hikes and higher employer contributions are being squeezed on all sides.
Some are trying to offset the burden through efficiency. Others are warning that they’ll have to pass the cost on to consumers — meaning future inflation could simply return in a different form.
A cost crunch for industry
Energy-intensive manufacturers are being hit particularly hard.
Rising energy prices, higher material costs, and global uncertainty are pushing up their overheads.
In some cases, the cost of specialist materials has increased by more than 60 per cent in just a few years.
These firms are the backbone of the UK’s industrial base, and many supply strategic sectors like defence and construction. Yet they’re finding that if they can’t absorb the costs, prices must rise — or jobs must go.
And it is not just a domestic problem: Global turbulence, driven in part by the return of Trump-era protectionism, is weakening demand for UK exports and investment.
Analysts warn that the UK could see cheap foreign goods diverted from the US market into Europe and Britain, undercutting domestic producers and further dragging on growth.
Interest rate dilemma
With inflation easing and job vacancies falling to their lowest point in four years, attention is turning to the Bank of England.
At 4.5 per cent, interest rates remain high. A cut next month is on the cards — not because the economy is roaring back to life, but because it is showing signs of strain.
But the Bank faces a dilemma: strong wage growth would normally suggest holding rates steady to avoid reigniting inflation.
That leaves policymakers stuck between two conflicting signals: a cooling economy that needs support, and wage data that implies there’s still heat in the system.
The government’s gamble
Chancellor Rachel Reeves [pictured looking all clever with her red box] called the latest drop in inflation “encouraging” but admitted that “there is more to be done,” recognising that families are still struggling with the cost of living.
She has staked her economic strategy on long-term investments in infrastructure, hoping these will deliver growth in the years to come.
It’s a gamble that may take time to pay off — and time is in short supply.
Price pressures are expected to return in April as energy and utility bills rise. Analysts predict that inflation could climb back to around three per cent, potentially undoing any short-term gains.
Shadow Chancellor Mel Stride was quick to criticise Reeves, blaming “reckless union payouts, tax hikes and a borrowing binge” for keeping inflation above the Bank of England’s two per cent target.
It’s a partisan jab, but one that will resonate with businesses and consumers who feel the pinch more than the progress.
Don’t be fooled by the numbers
The government may be talking up falling inflation as a win, but dig deeper and the picture is bleak.
People aren’t spending because they can’t afford to. Businesses are raising prices because they have no choice. And the global outlook is clouded by trade wars and weakening demand.
This isn’t a story of recovery.
It’s a story of strain.
If Rachel Reeves’s infrastructure spending delivers real economic benefit in the years ahead, it may vindicate her approach.
But that’s a long shot — and in the meantime, the risk is that today’s “progress” is just the calm before the next economic storm.
Vox Political needs your help!
If you want to support this site
(but don’t want to give your money to advertisers)
you can make a one-off donation here:
Be among the first to know what’s going on! Here are the ways to manage it:
1) Register with us by clicking on ‘Subscribe’ (bottom right of the home page). You can then receive notifications of every new article that is posted here.
2) Follow VP on Twitter @VoxPolitical
3) Like the Facebook page at https://www.facebook.com/VoxPolitical/
Join the Vox Political Facebook page.
4) You could even make Vox Political your homepage at http://voxpoliticalonline.com
5) Follow Vox Political writer Mike Sivier on BlueSky
6) Join the MeWe page at https://mewe.com/p-front/voxpolitical
7) Feel free to comment!
And do share with your family and friends – so they don’t miss out!
If you have appreciated this article, don’t forget to share it using the buttons at the bottom of this page. Politics is about everybody – so let’s try to get everybody involved!
Buy Vox Political books so we can continue
fighting for the facts.
Cruel Britannia is available
in either print or eBook format here:
The Livingstone Presumption is available
in either print or eBook format here:
Health Warning: Government! is now available
in either print or eBook format here:
The first collection, Strong Words and Hard Times,
is still available in either print or eBook format here:
Falling inflation isn’t a win – it’s a warning sign
Economic indicators appear to be showing promise, but be careful: falling inflation isn’t a win – it’s a warning sign.
Inflation has fallen — but there’s no reason to celebrate.
The latest figures from the Office for National Statistics show that price rises slowed to 2.6 per cent in March, down from 2.8 per cent in February.
Hailed as progress by government ministers, in reality, it looks far more like a signal that the economy is losing steam.
Buy Cruel Britannia in print here. Buy the Cruel Britannia ebook here. Or just click on the image!
Prices haven’t stopped rising — they’re just rising more slowly. The reason is that consumers and businesses alike are pulling back.
That’s not stability. That’s stagnation.
Demand is disappearing
One of the clearest signs is where prices have fallen.
Recreation and culture — including toys, games and hobbies — saw sharp drops. These are exactly the kinds of things people stop spending on when money is tight.
Petrol prices also fell, but this wasn’t the result of any domestic policy. It’s fallout from Donald Trump’s renewed trade wars. This means global demand for oil is down, pulling prices with it.
This isn’t the kind of inflation drop that signals economic strength.
It’s a sign of demand destruction — where households simply don’t have the disposable income to keep spending.
It’s the flipside of the cost-of-living crisis: people tightening their belts so much that it shows up in the national data.
Wage growth can’t keep up
Officially, wages are growing faster than inflation, with a 5.9 per cent increase over the year.
But rising taxes and higher living costs are eroding any real-world benefit. For many workers, more money on paper just means more money lost to rising National Insurance, or to higher prices at the till.
For businesses, the situation is just as strained.
Those facing increased staffing costs from minimum wage hikes and higher employer contributions are being squeezed on all sides.
Some are trying to offset the burden through efficiency. Others are warning that they’ll have to pass the cost on to consumers — meaning future inflation could simply return in a different form.
A cost crunch for industry
Energy-intensive manufacturers are being hit particularly hard.
Rising energy prices, higher material costs, and global uncertainty are pushing up their overheads.
In some cases, the cost of specialist materials has increased by more than 60 per cent in just a few years.
These firms are the backbone of the UK’s industrial base, and many supply strategic sectors like defence and construction. Yet they’re finding that if they can’t absorb the costs, prices must rise — or jobs must go.
And it is not just a domestic problem: Global turbulence, driven in part by the return of Trump-era protectionism, is weakening demand for UK exports and investment.
Analysts warn that the UK could see cheap foreign goods diverted from the US market into Europe and Britain, undercutting domestic producers and further dragging on growth.
Interest rate dilemma
With inflation easing and job vacancies falling to their lowest point in four years, attention is turning to the Bank of England.
At 4.5 per cent, interest rates remain high. A cut next month is on the cards — not because the economy is roaring back to life, but because it is showing signs of strain.
But the Bank faces a dilemma: strong wage growth would normally suggest holding rates steady to avoid reigniting inflation.
That leaves policymakers stuck between two conflicting signals: a cooling economy that needs support, and wage data that implies there’s still heat in the system.
The government’s gamble
Chancellor Rachel Reeves [pictured looking all clever with her red box] called the latest drop in inflation “encouraging” but admitted that “there is more to be done,” recognising that families are still struggling with the cost of living.
She has staked her economic strategy on long-term investments in infrastructure, hoping these will deliver growth in the years to come.
It’s a gamble that may take time to pay off — and time is in short supply.
Price pressures are expected to return in April as energy and utility bills rise. Analysts predict that inflation could climb back to around three per cent, potentially undoing any short-term gains.
Shadow Chancellor Mel Stride was quick to criticise Reeves, blaming “reckless union payouts, tax hikes and a borrowing binge” for keeping inflation above the Bank of England’s two per cent target.
It’s a partisan jab, but one that will resonate with businesses and consumers who feel the pinch more than the progress.
Don’t be fooled by the numbers
The government may be talking up falling inflation as a win, but dig deeper and the picture is bleak.
People aren’t spending because they can’t afford to. Businesses are raising prices because they have no choice. And the global outlook is clouded by trade wars and weakening demand.
This isn’t a story of recovery.
It’s a story of strain.
If Rachel Reeves’s infrastructure spending delivers real economic benefit in the years ahead, it may vindicate her approach.
But that’s a long shot — and in the meantime, the risk is that today’s “progress” is just the calm before the next economic storm.
Vox Political needs your help!
If you want to support this site
(but don’t want to give your money to advertisers)
you can make a one-off donation here:
Be among the first to know what’s going on! Here are the ways to manage it:
1) Register with us by clicking on ‘Subscribe’ (bottom right of the home page). You can then receive notifications of every new article that is posted here.
2) Follow VP on Twitter @VoxPolitical
3) Like the Facebook page at https://www.facebook.com/VoxPolitical/
Join the Vox Political Facebook page.
4) You could even make Vox Political your homepage at http://voxpoliticalonline.com
5) Follow Vox Political writer Mike Sivier on BlueSky
6) Join the MeWe page at https://mewe.com/p-front/voxpolitical
7) Feel free to comment!
And do share with your family and friends – so they don’t miss out!
If you have appreciated this article, don’t forget to share it using the buttons at the bottom of this page. Politics is about everybody – so let’s try to get everybody involved!
Buy Vox Political books so we can continue
fighting for the facts.
Cruel Britannia is available
in either print or eBook format here:
The Livingstone Presumption is available
in either print or eBook format here:
Health Warning: Government! is now available
in either print or eBook format here:
The first collection, Strong Words and Hard Times,
is still available in either print or eBook format here:
you might also like
More mistakes in the script? Correcting Cameron’s New Year speech
Osborne wants a ‘year of hard truths’. Here’s one: He’s HIDING the truth
Divisions in Coalition as MPs demand independent inquiry on poverty