The early signs of inflation as a result of the weakened pound are starting to show, as deflation eased in December and the cost of clothing and footwear increased, according to new figures.
While shop prices in general were down by 1.4 per cent in December compared to the same time last year, the majority of categories monitored in the BRC-Nielsen Shop Price Index saw month-on-month increases in prices, with clothing and footwear seeing month-on-month inflation for the first time in nearly two years.
In addition, deflation across non-food prices slowed to 1.9 per cent, down from 2.3 per cent in the previous month and the weakest rate since June 2015.
Food deflation also decelerated marginally, from 0.8 per cent in November to 0.7 per cent thanks to the supermarket price war.
Fresh food deflation was unchanged at 1.2 per cent for the second consecutive month but was down from the three-month average of 1.5 per cent, while ambient food saw inflation for the first time since June – up 0.1 per cent in December compared to the 0.1 per cent decline in November.
“We’ve said for some time that we expect to see underlying inflationary pressures, notably from the post-(EU) referendum fall in the value of the pound, feed through into shop prices,” British Retail Consortium (BRC) chief executive Helen Dickinson said.
“It’s too early to confirm that this is what we’re seeing in December’s figures: timings of seasonal discounts can cause monthly fluctuations at this time of year and retailers have continued to find ways to mitigate the impact on consumers.
“However, we expect the general trend in inflation to be upwards over 2017.
“The magnitude of the exchange rate movement and commodity price rises combined with the increasing costs of doing business means that retailers will have little choice other than to pass on some of these rising costs into prices but effect will be lessened by the intensity of competition.”