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In-store price inflation in the UK slowed sharply in January to its lowest level in almost two years as retailers slashed prices on goods during the downturn, industry data showed.
The British Retail Consortium said on Tuesday that annual store price inflation slowed to 2.9% in January from 4.3% in December. This is the seventh consecutive month of decline and the lowest level since May 2022.
The BRC Store Price Index, an early indicator of price pressures ahead of official data release on February 14, shows that underlying inflationary pressures continue to ease, even as the key index rose to 4% in December. It will raise expectations.
BRC chief executive Helen Dickinson said in-store inflation was due to retailers “deeply discounting products in January sales to stimulate consumer spending amid weak demand”. He said this was the cause of the decline.
Despite rising from November’s 3.9%, December’s inflation rate was still well below the multi-decade high of 11.1% set in October 2022.
Markets are set to cut interest rates in June as inflation is expected to slow towards the BoE’s 2% target, although the Bank of England kept its benchmark interest rate unchanged at 5.25%, a 15-year high on Thursday. It incorporates what you will do.
He noted that milk and tea prices also fell in January compared to the previous month, but beverage costs remained elevated due to the increase in alcohol duties.
Non-food prices fell 1.4% month-on-month, leading the year’s decline across all categories, according to the BRC. The annual non-food inflation rate slowed to 1.3% in January from 3.1% the previous month and was the lowest since February 2022.
Mike Watkins, director of retail and business insights at NielsenIQ, who helped create the data, said, “Shoppers are realizing savings at the checkout with promotions from non-food retailers, and “Retailers continue to cut prices even as the cost of goods falls.” ”
Annual food inflation also slowed to 6.1% in January from 6.7% in December, well below the peak of 15.7% in April 2023, according to BRC data.
Fresh food and ambient food prices both recorded lower annual growth rates. The former decreased from 5.4% to 4.9%, while the latter (referring to items that can be stored at room temperature) decreased from 8.4% to 7.7%.
Official food price inflation is expected to fall to 8% in December, continuing to slow from March’s 45-year high of 19.1%, according to BRC data. Food and energy prices have soared in the past two years since Russia invaded Ukraine in early 2022, hitting the poorest households hardest.
Despite the sharp rebound in price growth, the BRC warned of risks to the outlook, including higher business rates, an increase in the National Living Wage from April, and new cost pressures from the Red Sea unrest.
“Rising geopolitical tensions will also increase supply chain uncertainty and costs,” Dickinson said.