As we all know the cost of living has rose drastically since the country came out of lockdown and Russia launched their invasion into Ukraine. Specifically, the inflationary pressures on oil from Russia and agricultural produce from Ukraine having a drastic effect on the UK and globally. However, recently the inflation figures seem to be; fingers crossed; slowly but steadily falling from a height of 9.6% in October 22 to the latest update of 7.3% in June 23. Although this is good news the economy still has a long way to go to reach the Bank of England’s 2% target. One way to keep this negative trend going is to focus on food prices which seems to be thew target of Watchdog as they keep an eye on retailers preventing them from widening their profit margins.
As inflationary pressures seem to be falling, the economy is gradually opening and showing more room to breathe and retailers are experiencing this, as their input costs begin to fall. Watchdog’s aim is to see this relaxing of cost translate to the consumer rather than being absorbed by the supermarkets in the form of larger profit margins.
There are many benefits of this regulatory pressure one in particular being the stabilisation of our food prices and a reduction in the cost of living. Being that pockets are currently very thin for many families across the country our weekly shop is a large part of budget, therefore a stabilisation of food prices will be a massive help to the economy. Stable prices would mean that families can better budget their expenses and hopefully allow people who are living on a negative budget to be relieved of this pressure. This would alleviate some of the financial and mental stress that the country is currently under and help the psychological wellbeing of the nation maintaining a sense of predictability in their food expenses.
Another benefit of the pressure from watchdog and hopefully the subsequent action from the retailers is regaining consumer confidence. While inflation is high consumers are likely to spend more as they expect prices to rise further but if we see the figure begin to fall, as we have over the last few months, it may help restore confidence in our economy. The pressure from regulators will also inspire retailers to act with increased transparency as they follow the guidelines and present an ethical approach to consumers. This will furthermore increase confidence in our economy and allow the public to begin to relax.
On a more macroeconomic scale, the slowing of price rises will allow for increased investment, this is due to a few reasons. Firstly, as mentioned earlier consumers will have a more relaxed budget and more purchasing power leading to a greater appetite for products and services outside of the essentials. This in turn should cause a response from business to increase investment to match the demand. Secondly, if the inflation figure does persist in its decline the Bank of England are less likely to raise the base interest rate which will stop the increasing cost of borrowing. Therefore, by slowing down the cost of borrowing businesses will be influenced to take out loans and invest in the economy. The general benefit of increased investment is the growth of our economy and in time a restoration of general stability in the nation.
In summary, the regulatory pressure is a just small steppingstone in the path to a stable economy, but it is positive. We need these actions from independent regulators and the government to persist in order to restore stable prices and growth and hopefully this is a first sign of a return to normality, although that is a bit superstitious it is indisputably a positive for consumers in the short term and hopefully will begin to relieve the pressure on millions of struggling families in our country.