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UK shop price inflation slows to lowest rate in over a year

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UK shop inflation eased to the lowest rate in more than a year in November as competition increased in the run-up to Christmas and food cost growth continued to fall, according to industry data.

The British Retail Consortium said on Tuesday that annual shop price inflation slowed to 4.3 per cent from 5.2 per cent in October, the sixth consecutive monthly decline and the lowest rate since June last year.

The BRC shop price index, which provides an early indication of pricing pressures ahead of the publication of official data on December 20, will raise hopes that slowing inflation and strong wage growth will support sales during the festive period.

BRC chief executive Helen Dickinson said the fall resulted from retailers competing “fiercely to bring prices down for customers ahead of Christmas”.

The BRC said price cuts in health and beauty products — as retailers rushed to shift stock — had led to a small month-on-month drop in non-food prices, which helped bring the annual rate of inflation in this category down to 2.5 per cent from 3.4 per cent in October.

Line chart of Annual % change in consumer price index showing UK shop price inflation dropped in November

Annual food inflation slowed to 7.8 per cent in November from 8.8 per cent the previous month, which Dickinson said was largely because of “lower domestic energy prices reducing overall input costs, particularly for dairy products”.

The BRC data suggested that the official measure of food prices would continue to ease further after slowing to 10.1 per cent in October from a peak of 19.1 per cent in March, the highest level in more than 45 years.

Retailers have in large part blamed surging food costs on the delayed effect of energy and commodity prices soaring after Russia’s invasion of Ukraine.

Mike Watkins, head of retailer and business insight, at NielsenIQ, who helped compile the data, said that food retailers would “be optimistic that footfall will increase as inflation slows and shoppers get into a festive mood”.

BRC reported that growth in fresh food prices eased to 6.7 per cent in November from 8.3 the previous month and well below the March peak of 17.8 per cent.

Price growth of ambient food, items that can be stored at room temperature, slowed marginally to 9.2 per cent in November from 9.5 per cent the previous month as the weak pound pushed up the costs for these goods, which are largely imported.

However, the BRC warned of price pressures building again next year because of the rise in the corporation tax rate and the national living wage. Dickinson said she expected these two factors to “likely stall or even reverse progress made thus far on bringing down inflation, particularly in food”.

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