UK shop prices fall less sharply

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LONDON- Prices in British shops fell less sharply this month, according to a survey from the British Retail Consortium on Tuesday that suggested consumers could face renewed pressure on their spending power.

Annual shop price deflation of 0.6 percent in the 12 months to November followed a 0.8 percent drop in the 12 months to October, the BRC said.

Its measure of shop price inflation dropped between May 2023 and July this year after which it fell further into deflation, until now.

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“With significant price pressures on the horizon, November’s figures may signal the end of falling inflation,” Helen Dickinson, BRC’s chief executive, said.

Official figures last week showed consumer price inflation rose to 2.3 percent in October, largely reflecting a surge in household energy prices.

The Bank of England this month cut interest rates to 4.75 percent from 5 percent but said it was likely to move only gradually with further cuts.

On Monday, BoE Deputy Governor Clare Lombardelli expressed concern about the risk of stronger price growth than forecast.

The BRC’s Dickinson said prices would increase as stores pass on higher staffing costs including in finance minister Rachel Reeves’ budget last month.

Reeves on Oct.30 announced a 25 billion-pound ($31.53 billion) rise in social security contributions by employers alongside a 6.7 percent uplift in the minimum wage.

The BRC survey showed food inflation fell to 1.8 percent from 1.9 percent in October. Prices of non-food items fell by 1.8 percent, a less severe drop than October’s 2.1 percent decrease.

A separate survey from British supermarket Asda on Monday said a drop in households’ disposable income and rising inflation could subdue Christmas spending. 

Britain’s economy contracted unexpectedly in September and growth slowed to a crawl over the third quarter, data showed last week, an early set back for finance minister Rachel Reeves’ ambitions to kick-start a sustained pickup.

Gross domestic product slipped by 0.1 percent in monthly terms during September as the services sector flat-lined, while manufacturing and construction dropped, the Office for National Statistics said.

For the third quarter as whole, the economy grew by 0.1 percent, slowing from 0.5 percent growth during the second quarter.

Economists polled by Reuters and the Bank of England had forecast an expansion of 0.2 percent in the July-September period, slowing from the rapid growth of the first half of 2024 when the economy was rebounding from last year’s shallow recession.

“Improving economic growth is at the heart of everything I am seeking to achieve, which is why I am not satisfied with these numbers,” Reeves said. “Now we are going to deliver growth through investment and reform,” she added.

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