Inflation Drops Despite Supplier Price Rises

By : Business Save |March 05, 2019 |Energy Blog |0 Comment

Despite suppliers raising energy prices, there was good news for British consumers as January saw inflation drop to 1.8%. This inflation decrease comes on the heels of the biggest month on month gas price fall for over thirty years.

Consumer Prices Index Lowest for Two Years

The Consumer Prices Index was as high as 2.1% in December of 2018. The drop of 0.3% represents the lowest level it has been over the last two years. Much of it has been ascribed to a decrease in the cost of wholesale energy prices. This, however, seems at odds with the Government’s recent assertion that wholesale energy prices have increased. The increase was even directly blamed for the immediate default tariff price cap raise, initially implemented just seven weeks ago.

Despite the confusion over whether wholesale energy prices are rising or falling, the inflation drop is still great news. It will boost the economy ahead of what will be a tricky period following the uncertainty over Brexit.

According to the Office for National Statistics (ONS), there has also been a steep fall in petrol prices. The price of petrol has decreased by 2.1 pence month on month. The ONS also cited lower hotel costs as helping to reduce pressure on prices.

Another boon for ordinary working people is that the inflation drop should lead to an increase in wage growth.

Wage Growth ‘Cannot Come Too Soon’

The Resolution Foundation is a British think tank that aims to improve the standard of living for lower income families. Their Senior Economic Analyst, Stephen Clarke, was effusive about the inflation news, saying,

“The pronounced drop in inflation this month, driven by sharp falls in energy prices, marks the first time that it has been below the Bank of England target in two years. This will provide a welcome boost to people’s spending power and means that next month we’re likely to see real wage growth of around 1.5% – the fastest since mid-2016.

 

“This cannot come too soon for households, with average earnings yet to be restored to their pre-crisis levels.”

Inflation Drop Contradicted by Price Cap Increase

The inflation decrease brought about by tumbling wholesale energy prices has contradicted the recent energy price cap hike. The original price cap was implemented on January 1st, but has already been increased to accommodate wholesale energy price rises.

The Chief Executive of Ofgem, Dermot Nolan, said of the price cap rise,

“We can assure these customers that they remain protected from being overcharged for their energy and that these increases are only due to actual rises in energy costs, rather than excess charges from suppliers profiteering.”

The price cap rise has led to immediate energy price hikes by the Big Six suppliers. Customers on the affected default tariffs are advised by energy industry experts to shop around for a better deal. Ideally they should find and switch to a new supplier before April, when the new prices come into effect.

If you are interested in learning about the different energy suppliers and tariffs available for you and your business, contact Business Save and their team of highly experienced energy experts.

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