Belfast Telegraph

UK consumers 'in for wake-up call in 2017' as inflation rise inevitable

By Josie Clarke

Consumers are still enjoying falling shop prices, but it is "inevitable" that this year will see an upward trend in inflation, figures suggest today.

Overall, January bucked the monthly trend of an easing-in shop price deflation, with prices down 1.7% compared with the same time last year - a larger year-on-year fall than December's 1.4%, according to the BRC-Nielsen Shop Price Index.

Deflation across non-food prices also accelerated to 2.3% in January from December's 1.9%, while food deflation hit 0.8% from the 0.7% the month before.

British Retail Consortium chief executive Helen Dickinson said: "For now, consumers continue to benefit from falling shop prices, year on year. However, fluctuations in the monthly figures belie an underlying trend of building cost pressures that are gradually feeding through from the fall in sterling combined with higher commodity prices.

"This will inevitably mean that we start to see a general upward trend in inflation over 2017."

Nielsen's head of retailer and business insight, Mike Watkins, said: "Consumer demand was perhaps better than expected at the end of last year, and retailers are still managing to limit currency related cost increases being passed on to shoppers.

"This is helping to give some stability to the industry at the start of 2017. However, there is already inflationary pressure elsewhere in the economy and this will start to have an impact on the disposable income of households later in the year." The Office for National Statistics (ONS) said the Consumer Price Index (CPI) measure of inflation hit 1.6% in December, up from 1.2% in November, marking the highest level since July 2014 and higher than a forecast 1.4% rise.

Ulster Bank chief economist Richard Ramsey predicted inflation would reach 3.0% year-on-year in the next few months. "Inflationary pressures stemming from rising import costs due to sterling weakness are expected to push consumer prices higher. This will erode consumers' disposable incomes, particularly for those experiencing benefit freezes and wage caps," he said.

"A wake-up call for inflation also means a wake-up call for consumer spending and economic growth.

"Watch this space."

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