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British shop prices fall in December, more retail deflation seen
January 6, 2016 / 7:27 AM / 2 years ago

British shop prices fall in December, more retail deflation seen

A woman checks her phone as she stands next to a store window advertising a sale on Oxford Street in London, Britain December 26, 2015. REUTERS/Neil Hall

LONDON (Reuters) - Shop prices in Britain fell in December for the 32nd consecutive month, the British Retail Consortium said on Wednesday, the latest sign that inflation is likely to remain tame.

The BRC said prices in British shops eased by 2 percent over the 12 months to December, compared with a 2.1 percent fall in November that was jointly the steepest on record.

Non-food prices fell 3 percent year-on-year in December, a slightly smaller decline than November‘s, as clothing and footwear prices continued to slip.

Against a backdrop of weak global commodities prices, food prices eased 0.3 percent.

“We can expect the current levels of deflation across the retail industry to continue for the first half of 2016,” Mike Watkins, head of retail and business insight at data company Nielsen, which collates the survey, said.

“After the unseasonably mild autumn and early winter, many non-food retailers will use price cuts and targeted promotions early in the year.”

The usually reliable British clothing retailer Next was one that struggled with the unusually warm weather, reporting disappointing sales in the run-up to Christmas.

The Bank of England is watching measures of British inflation closely at it judges when to raise interest rates. Economists polled by Reuters expect this around the second quarter of this year.

Consumer price inflation remains close to zero, while the latest official reading showed earnings growth - another key indicator for the BoE - has slowed.

The BRC price index has shown deflation for nearly three years, pushed down by a price war among supermarkets as well as global trends such as falling oil and food prices. The strengthening of the pound has also made imports cheaper.

(Reporting by Ana Nicolaci da Costa; Editing by Andy Bruce)

ana.dacosta@thomsonreuters.com; + 44 207 542 7748; Reuters Messaging: ana.nicolacidacosta.thomsonreuters.com@reuters.net))

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