UK shop price inflation eased to its weakest level in 16 months in December, as retailers resorted to large-scale discounting to boost consumer demand, the British Retail Consortium (BRC) said in a report on Wednesday.
Overall shop price inflation eased to 1.7 percent in December from 2 percent in November. Non-food inflation slowed to a two-year low of 0.3 percent in December from 0.8 percent in November. Food inflation rose to 4.2 percent from 4 percent over the same period.
BRC Director General Stephen Robertson said that even before the impact of last January's value-added tax rise comes out of the year-on-year comparisons, shop price inflation has reached a 16 month low. "This is being driven by price cuts in electricals, clothing and footwear where many items are now cheaper than they were at this time last year."
Robertson said that the government's official measure of inflation is running at nearly 5 percent as businesses and householders battle with soaring utility and fuel bills. Stiff competition throughout the retail sector resulted in a blizzard of promotions and discounts ahead of Christmas which will have been a particular help to families facing falls in their disposable incomes, he added.
The BRC-KPMG retail sales survey revealed yesterday that heavy discounting boosted sales notably in December. But the upswing was due to some one-off factors such as the comparison with severe snow disruption a year ago and deeper discounting, according to BRC.
"A solid December result hasn't rescued a pretty miserable year and with consumer confidence returning to levels last seen during the recession, 2012 is expected to be an equally challenging year," Robertson said Tuesday.
Research firm GfK NOP reported last month that British consumer confidence declined to its lowest level in almost three years in December, as pre-Christmas spending failed to lift sentiment, which has been hurt by negative assessment of the economy's prospects.
Concerns about the impacts of the lingering Eurozone debt troubles and unemployment fears have been weighing heavily on household sentiment.
The Recruitment and Employment Confederation (REC) and KPMG report on jobs, published today, showed reduction in permanent placements for the third successive month in December. While permanent staff availability accelerated to a two-year high, agencies' billings from the employment of temporary/contract staff declined for the first time in almost two-and-a-half years.
Employers are still hiring and using temps in large numbers; however, they are starting the year on a cautious note and are taking their time to make workforce decisions, REC Chief Executive Kevin Green said. "The quicker the Eurozone sovereign debt crisis is resolved and we get some economic visibility, the better it will be for employer confidence and the UK jobs market," the official added.
The Bank of England is expected to retain its key interest rate at a record low during the monetary policy meeting to be held on Thursday. It is also likely to keep the asset purchase target unchanged at GBP 275 billion.
by RTT Staff Writer
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