Owners and senior managers of businesses will have been relieved to see that inflation dropped to 2.6% on the back of lower petrol prices. Leading economists including the Bank of England had expected inflation to continue to creep up over the next few months, putting pressure on living standards as salaries failed to keep up. Businesses had probably started to factor in an interest rate increase later in the year but this may not happen until 2018 now.
Keeping inflation under control is important for many businesses who struggle to pass on price rises to their customers and then do not have sufficient profits to offer employees above inflation salary increases. A difficult situation all round for businesses that has been made a little easier to manage on the back of the latest inflation figures.
Inflation slowed to 2.6pc in the year to June, falling back from 2.9pc in May in a surprise break from the steep upward spike in prices over the last year. Falling global oil prices have helped to keep a cap on the rise in living costs by restraining fuel prices. The fall in the pound has pushed up the cost of imported goods in recent months, forcing shop prices higher and putting household budgets under pressure. Average weekly pay increased by 1.8pc in the 12 months to May, which meant that it failed to keep up with living costs.