Falling food costs and easing commodity price pressures pulled down shop price inflation in the United Kingdom to its lowest level for two and a half years in June, the British Retail Consortium (BRC) said in report published Wednesday.
Overall shop price inflation slowed to 1.1 percent from 1.5 percent in May. Food inflation fell to 3.5 percent in June from 4.3 percent in the previous month. Deflation in non-food accelerated to 0.3 percent from 0.1 percent in May.
According to BRC, food inflation is at its lowest for nearly two years and the price of non-food goods is down on a year ago for the fifth consecutive month.
"This is good news all round for hard-pressed customers and shows retailers holding back prices as commodity cost pressures ease," BRC Director-General Stephen Robertson said.
Crude oil prices are down a quarter on three months ago with food commodities, such as coffee and sugar, falling sharply over the same period, he noted. At the same time, weak consumer demand continues to drive deep and heavily targeted discounting, particularly among non-food goods, Robertson added.
"With real disposable incomes still dropping, let's hope there's more downward pressure to come from past falls in commodity prices working through to inflation," the official said.
According to last month's official data, consumer price inflation in the U.K. fell to 2.8 percent in May, the lowest level since November 2009, fueling expectations that a majority of the Bank of England policymakers will support additional stimulus at the upcoming rate-setting session.
The BoE estimates the rate of inflation to be around 1.6 percent in two years time, below the central bank's 2 percent target.
BoE Governor Mervyn King has said earlier in June that the case for more stimulus is increasing amid deterioration in the economic outlook. The central bank, in its latest edition of the Quarterly Bulletin, said that upside risk to inflation has "receded a little" during recent months.
by RTT Staff Writer
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