UK shop prices fall as more retail deflation forecast

Shop prices in Britain fell in December for the 32nd consecutive month, the British Retail Consortium said yesterday, the latest sign that UK inflation is likely to remain tame.

The BRC said prices in British shops eased by 2% over the 12 months to December, compared with a 2.1% fall in November that was jointly the steepest on record.

Non-food prices fell 3% year-on-year in December, a slightly smaller decline than November’s, as clothing and footwear prices continued to slip.

Against a backdrop of weak global commodities prices, food prices eased 0.3%.

“We can expect the current levels of deflation across the retail industry to continue for the first half of 2016,” said Mike Watkins, head of retail and business insight at data company Nielsen, which collates the survey.

The usually reliable British clothing retailer Next was one that struggled with the unusually warm weather, reporting disappointing sales in the run-up to Christmas.

The Bank of England is watching measures of British inflation closely at it judges when to raise interest rates.

Economists polled by Reuters expect this around the second quarter of this year.

Consumer price inflation remains close to zero, while the latest official reading showed earnings growth has slowed.