‘Good news’ for families as inflation at its lowest level for three years

INFLATION on goods bought in shops has fallen to its lowest level since November 2009 at just 1.1 per cent. The drop, fuelled by significant reductions in the price of clothes and electrical goods and a slowdown the increase in the price of food, has been described as “good news” for customers.

The British Retail Consortium (BRC) shop price index showed inflation on a range of goods had fallen from 1.5 per cent in May to 1.1 per cent in June.

This is the lowest inflation rate since 2009 when it was 0.2 per cent.

BRC director general Stephen Robertson said: “Overall shop price inflation is at its lowest for two and a half years. This is good news all round for hard-pressed customers and shows retailers holding back prices as commodity cost pressures ease.”

Food inflation slowed from 4.3 per cent in May to 3.5 per cent in June, while for non-food items the fall in prices was 0.3 per cent.

Mr Robertson said falls in the price of raw materials and increased competition between retailers had translated into good news for consumers.

He said: “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.”

Among those items that have seen their prices climb are health and beauty products and DIY and gardening goods,

But clothing and footwear have fallen in price by 4.8 per cent on last year, while prices have dropped 0.3 per cent since last month.

Electrical goods also fell in price, with a drop of 3.1 per cent since last year and a drop of 0.2 per cent since last month.

According to a report by PricewaterhouseCoopers, heavy discounting by stores is one of the main reasons for the drop in retail inflation.

The report found 73 per cent of high-street retailers are currently advertising sales or promotions, compared to 70 per cent a year ago.

Howard Archer, chief economist at Global Insight, said: “This is some much-needed welcome good news for the economy.

“The falling back in shop-price inflation eases the squeeze on consumers’ purchasing power.

“Falling food-price inflation also frees up more money for discretionary spending by consumers.

“Meanwhile, the increased year-on-year drop in non-food prices suggests that a number of retailers feel that they have to price competitively or engage in promotions to get still pressurised and worried consumers to part with their cash.

“It also adds to other recent evidence that inflationary pressures are easing, which facilitates further stimulative action to try and help the economy from the Bank of England. It makes more quantitative easing look even more likely on Thursday.”