Following the Bank of England’s inflation rate announcement, Markus Kuger, Chief Economist at commercial data & analytics firm, Dun & Bradstreet, said: “With the latest figures for May falling to a four-year low of 0.5%, inflation is significantly undershooting the Bank of England’s target rate of 2%. As the British economy is trapped in the biggest contraction since the early 18th century, the drop in inflation is not surprising. Lower commodity prices (most notably oil), as well as a slowdown of the labour market have led to a reduction in inflationary pressures and with retailers granting heavy discounts to reduce their inventories, any uptick in the short-term seems unlikely. On the monetary policy front, the very low inflation figures increase the probability that the Bank of England will soon inject more monetary stimulus via its quantitative easing programme (or potentially lower interest rates into negative territory).
“Dun & Bradstreet’s country risk rating for the UK remains at an all-time low and although our forecasts have improved slightly with the gradual lifting of lockdown restrictions, we are maintaining a ‘deteriorating’ outlook. We have also adjusted several of our macro-economic projections including our forecast for GDP – which we now predict will contract by 8.5% in 2020. The impact on business failures has been delayed due to support from government schemes, but our data is showing that payment performance is already deteriorating across all 16 sectors analysed since the start of the pandemic.”