UK price cuts trigger inflation fall
Source: BI-ME with UKPA , Author: Posted by BI-ME staff
Posted: Tue January 17, 2012 12:53 pm

INTERNATIONAL. A raft of high-street promotions in the run-up to Christmas triggered the largest drop in inflation in nearly three years.

Consumer prices index (CPI) inflation dropped to 4.2% in December from 4.8% in November, the Office for National Statistics (ONS) said, equal to the decline between March and April 2009.

The drop was driven by a 2.8% plunge in the price of clothing and footwear as retailers slashed prices to pull in more customers in the run-up to Christmas.

But there was less evidence than expected of the impact of the supermarket price war started in early October, as food prices rose by 1.4% month on month.

The drop in the rate of inflation in December underlines the easing pressure on households after a sustained period of high prices and slow wage growth.

The Bank of England in its last inflation report, in November, said that it expected the rate of inflation to fall back gradually through 2012 before possibly undershooting the Government's 2% target next year.

The increase in the cost of living is expected to slow further as the economy grinds to a halt and unemployment soars towards the three million mark.

December's figures and any further slowdown in inflation will support the argument in favour of holding interest rates at record lows of 0.5% and injecting billions of pounds into the Bank's quantitative easing programme.

Elsewhere, the ONS said downward pressure came from fuel prices, which dropped 0.6%, and alcoholic drinks, which fell 1.5% between November and December.

The fall in clothing prices was driven by a wide range of garments, with a particularly large drop in women's outerwear, the ONS said.

 

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