Belfast Telegraph

Falling cost of food a boost to Northern Ireland household spending power

By Jamie Stinson

In what is being described as "a boost to Northern Ireland households", food and fuel prices are coming down - two areas where the region's households spend a higher proportion of their disposable income.

The UK Consumer Prices Index (CPI) rose to 1.3% in October from its five-year low of 1.2% last month, according to the Office of National Statistics (ONS).

Inflation would have increased by another 0.3% had it not been for declining price of food and fuel.

Food prices have failed to rise for the last six months, the longest run in 14 years, as supermarkets have become locked in a price war.

Angela MacGowan, chief economist at Danske Bank, said the low rate of inflation was a benefit to consumers, and will mean people should have more money in their pockets, at least in the short-term.

"This is good news for households and works to boost disposable incomes and private demand within the economy," she said.

"In particular the largest downward pressures on the headline rate of inflation have come from food prices and fuels - two areas in which Northern Ireland households spend a higher proportion of their disposable income."

Richard Ramsey, chief economist at Ulster Bank, said that UK-wide, the cost of food and non-alcoholic drinks decreased by 1.5% year-on-year, the fastest rate of decline since June 2002.

In October fuel prices across the UK fell by 2.5p from September, with oil prices last week falling to their lowest level since 2010.

Mr Ramsey said the falling oil price was a boost for motorists and should provide even lower prices at the pump in the months to come.

"The sharp decline in the oil price in recent weeks should feed through to even lower prices in the forecourts in the months ahead," he said.

While consumers will be happy to see the price of food and energy bills decrease, they will be looking for their wages to increase, Mr Ramsey added.

"Households require a sustained period of above-inflation wage increases in order to repair their battered household finances," he said.

The latest figures show inflation has now been at or below the Bank of England target of 1% for the last 11 months.

Background

Bank of England Governor Mark Carney said last week he expected the rate of inflation to fall 1% over the next six months. With inflation still low, Mr Carney could potentially delay an increase in interest rates later than quarter one of 2015, when it was originally expected. The Retail Price Index, which includes housing costs, was unchanged at 2.3% in October.

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