As expected, headline inflation eased again in July, with the rate of price rises now 6.8 per cent. That followed on the heels of a gross domestic product (GDP) surprise to the upside – the economy grew by 0.5 per cent in June, and by 0.2 per cent over the second quarter.
It’s too soon to get the champagne out. Core inflation has not budged, the Bank of England (BoE) has a battle on its hands with record growth in wage levels, and the truth is there’s not much difference between recession and expansion of 0.2 per cent, so as things stand it’s unrealistic to assume that growth will now stop being elusive.
The question to focus on, however, is not what level of output might emerge soon, or even if it will. It’s what happens when inflation is tamed and more clement conditions return.