Inflation falls as food prices drop

14 December, 2011

The falling cost of food, boosted by a supermarket price war, contributed to a small fall in inflation, statistics revealed yesterday.

Inflation measured on the consumer prices index (CPI) fell to 4.8% in November, down from 5% in October, the Office for National Statistics (ONS) said.

It said the biggest downward pressure on inflation in November came from food prices, which rose by much less than a year earlier.

The ONS said: “Bread and cereals’ prices fell by a near record 1.0% for an October to November period, compared with a near record rise of 1.9% a year ago. Last year, wheat prices increased as global supply problems boosted demand for British wheat and the UK harvest was smaller than expected.”

It added that with sugar, jam, syrups, chocolate and confectionery prices fell by 0.7%, a record fall for an October to November period, compared with a record rise of 1.9% between the same two months a year ago.

Despite the dip, Chris Williamson, chief economist at Markit, said: “The rate of inflation signals more pain for households in the coming months, as prices for goods and services continue to rise more than twice as fast as incomes.

“With consumer spending accounting for around two-thirds of all spending in the UK economy, this will act as a substantial dampener on economic growth, and the combination of weak consumer spending with public sector spending cuts and falling demand for UK exports means there is a strong chance of the UK dipping back into recession as we move into 2012.”






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