Inflation dropped to 7.9% in June 2023, the lowest it has been for more than a year.
Paul Butterworth, CEO at Chambers Wales South East, South West and Mid, said:
“Today’s drop in inflation to 7.9% is an encouraging step in the right direction for Welsh businesses.
“The Q2 figures show that inflation was more of a concern to two thirds of businesses in Wales than in the previous quarter, so the latest figures are welcome news following months of stagnant rates.
“While this gives businesses in Wales hope that inflation and the cost of living is beginning to ease with some optimism of economic growth, businesses continue to be under pressure to review prices of goods and services due to labour costs. In our Quarterly Economic Survey, 73% of businesses in Wales are now citing labour costs as a key concern, 70% concerned about energy costs and a further 52% concerned about raw material costs.
“As inflation continues to reduce, businesses will enter the next half year and 2024 with increased confidence to invest in skills, training and job creation to contribute to a more prosperous Wales.”
Alex Veitch, Director of Policy at the BCC, said:
“Today’s data show that while consumer price and core inflation remain stubbornly high, businesses’ input prices have fallen.
“While firms’ costs are now much higher than a year ago, the fall in the input rate will give some hope that consumer price inflation will soon start to ease. However, the drivers of price rises have shifted with labour costs now the most significant factor. This may slow down the rate of CPI decline – due to the high number of job vacancies.
“Our latest Quarterly Economic Survey in July, of 5,000 businesses, showed that fewer firms are now expecting their prices to rise, and while inflation remains the top concern, the numbers worried have been falling since the end of 2022.
“The drivers of inflation are diverse with most (68%) now citing labour costs as a key pressure, 63% citing utilities, and 45% citing raw materials. Labour costs may remain an issue for business for some time; although the figure has been steadily falling, there are still around 1 million job vacancies in the UK.
“However, for manufacturers, 75% cited raw materials as the main cost pressure, and hospitality firms were far more likely than all other sectors to cite utility costs as a worry.
“But overall, our data show there has been optimism building in the business community that future prices rises might not be inevitable. Today’s ONS findings will be an important factor for the Bank of England to consider going forward.”