- Mike Watkins, head of retailer and business insight at Nielsen
Shop prices in the UK remained in deflationary territory in December, but fell at a slightly slower pace, while food prices climbed after declining for the first time on record in November, according to the British Retail Consortium. Overall UK shop prices were 1.7% lower in December compared with the same period a year earlier and following 1.9% fall in November. Annual food price inflation rose a bit to 0.1% after falling 0.2% in November, while non-food deflation slowed slightly to 2.8% in December from 2.9% in the previous month. The data reinforces expectations that overall UK inflation remained low in December. Cooling inflation in recent months has increased Britons' spending power and pushed back predictions of when the Bank of England will start to hike interest rates. UK CPI inflation fell in November to 1%, the smallest increase in 12 years, and may drop further below the official target of 2%. Ben Broadbent, the BoE's Deputy Governor, said that the lower inflation forecast for 2015 is mostly commodity prices and import prices driven.
If inflation falls below the 1% threshold, it necessitates an open letter to UK Chancellor George Osborne, addressed from Bank of England Governor Mark Carney. The December inflation figures are due next Tuesday, January 13.
© Dukascopy Bank SA