LONDON (MNI) – Annual shop price inflation fell for the fifth
consecutive month in February, to 1.2% from 1.4% in January, hitting its
lowest level since March 2010, according to the British Retail
Consortium-Nielsen Shop Price Index.
Yearly shop price inflation is being driven down in part because
the January 2011 VAT hike has dropped out of the comparatives and in
part by consumer caution, according to BRC/Nielsen. Monthly shop prices
were up 0.5% compared with 0.3% in January while annual non-food
inflation in February turned deflationary for the first time since
November 2009.
Annual food price inflation accelerated to 4.2% from 3.7% in
January. The monthly rate eased to 0.8% compared to January’s 1.1%.
BRC-Nielsen said that the rise in the annual rate was driven primarily
by the ambient food category.
Non-food prices fell 0.7% on the year compared to a flat rate in
January, the lowest rate of non-food inflation since November 2009. The
monthly rate showed a rise of 0.3% compared to January’s -0.2%.
The BRC cited a combination of prolonged discounts and the impact
of the 2011 VAT rise for the non-food deflation. The Bank of England
estimated that the 2011 VAT rise added about one percent to overall CPI
inflation throughout last year, with three quarters of that rise being
passed on by the end of Q1.
Oil prices continue to be one of the biggest upward risks to
near-term inflation. The report adds that pressure on household budgets
is likely to ease back as the headline inflation rate begins to fall.
Stephen Robertson, Director General of the BRC, said that “while
food and utility bills are eating up an ever-bigger proportion of
household budgets, many goods sold by retailers now cost less than they
did a year ago.”
Mike Watkins, Senior Manager of Retail Services at Nielsen,
explained this is due in part to “fragile” consumer confidence. The fall
in disposable income is putting a strain on households as “fuel and
energy costs are still rising so retailers are having to work hard to
encourage consumers to spend.”
–Sanjukta Moorthy is a reporter at Need to Know News;
Tel: +44 207 862 7485; email: sanjukta.moorthy@ntkn.com
[TOPICS: M$B$$$,MABDS$]
