Ease in inflation enough to avoid recession?

Could easing inflation help small businesses manage their cashflow better?

Easing inflation may help prevent the UK from entering another recession, despite evidence of reduced consumption and business spending towards the end of 2011, research has found.

BDO’s Output index has indicated a drop in output for the seventh consecutive month, falling to 91.4 in December from 92.5 in November. This index is used to measure expectations of turnover three months ahead, with 95.0 the crucial mark which, when exceeded, indicates growth. Growth was last recorded in July 2011.

But whilst BDO’s index suggests poor results, their Inflation Index also came down for the fifth consecutive month, which will prove a relief to consumers.

Partner at BDO, Peter Hemington commented on the figures, “As our data shows, there are areas for optimism in the year ahead but it is apparent that the UK economy has reached a crunch point. The government must respond decisively if the UK is to avoid a period of prolonged contraction”.

BDO suggested a further round of quantitative easing and more lending to UK businesses to help stimulate the economy for the better and assist in lifting the UK away from lingering doom and gloom.