The deepest food-price deflation on record needn't be a bad thing for the struggling UK grocery industry, according to the British Retail Consortium.
Food prices declined 0.5 per cent in January from a year earlier, which combined with a falling oil price, low unemployment and rising real incomes is boosting the outlook for consumer spending, the lobby group said today in a statement.
"2015 is shaping up to be a win-win year for shoppers and retailers alike,” BRC director general Helen Dickinson said in a statement. A halving of the oil price since the summer has helped retailers with the cost of procuring products, she said.
Falling prices pushed the British grocery market into decline for the first time in at least two decades last year. Deflation has been fueled by the emergence of discounters Aldi and Lidl, which are growing their share of the market.
Overall, UK shop prices fell for the 21st month in a row in January, though the pace of deflation decelerated to 1.3 per cent from 1.7 per cent in December, the BRC said. The decline in food prices compared with 0.1 per cent deflation in December.
The BRC’s numbers indicate that inflationary pressure remains subdued ahead of a Feb. 5 Bank of England meeting. Officials are likely to keep the interest rate at 0.5 per cent, according to a Bloomberg survey of economists.
Bloomberg news, edited by ESM
