Reacting to the latest GDP data from the ONS, 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 causes 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.”