Belfast Telegraph

Family inflation boost as shops launch price wars

By Margaret Canning and PA

Households in Northern Ireland are expected to benefit from a four-year low in inflation as supermarket price wars pushed food and drink costs to their steepest decline in nearly a decade.

The Consumer Prices Index (CPI) measure of inflation dropped more heavily than expected to 1.5%, from 1.8% the month before, the Office for National Statistics (ONS) said.

CPI equalled the rate seen in October 2009. It was last lower, at 1.1%, in September 2009.

The latest figures mark the sixth month in a row when the rate has been at or below the Bank of England's 2% target, the first time this has happened since 2009.

Danske Bank chief economist Angela McGowan said households in Northern Ireland would welcome the fall in inflation, as wage growth was "very sluggish".

"Lower prices for transport, food and clothing will work to ease pressure on disposable incomes – especially in Northern Ireland where a larger proportion of household income is spent on food and clothing relative to the rest of the UK.

"The latest data from the government family expenditure survey shows that Northern Ireland households spent £159 a week on food, clothing and transport in 2012 relative to the UK average of £142.60.

"With inflation now at its lowest level for over four years, consumers should hopefully be able to maintain the recovery that we have recently seen in the local economy".

Air fares, which were lower due to the timing of Easter, had a significant downward effect, while petrol pulled in the other direction as pump prices crept up.

PwC chief economist Dr Esmond Birnie said everyday goods were coming down in price – but real earnings growth was still far off as inflation was still above the 0.7% rate of wage increases.

"Food and non-alcoholic beverages fell by 0.6% year-on-year in May, the biggest fall in a decade, with basics like bread, cereals and vegetables the main contributors to the fall.

"By implication, the UK economy is moving closer to a position where earnings grow in real terms although there is probably some distance to go before that happens. This is good for consumers' purses and wallets and household purchasing power."

Ulster Bank chief economist Richard Ramsey said food prices were down year on year for the first time since March 2006, with the strengthening pound largely responsible.

Tesco, Asda and Sainsbury's have been battling on price as they face an increasing threat from discounters Aldi and Lidl gnawing at their market share.

Belfast Telegraph

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