Cheaper petrol and supermarket price wars pushed down prices for shoppers at the fastest annual rate since the global financial crisis in August, official figures today showed.
The overall price of retail goods was 1.2 per cent lower than the same month a year earlier, the biggest drop recorded since July 2009. The biggest contributor to the deflation was fuel prices, on the back of lower global oil prices. Petrol prices were down 5 per cent year on year.
But there was also downward pressure from food stores, where prices fell 0.1 per cent in the first annual decline in prices at these retailers in almost a decade as supermarkets sought to attract shoppers with discount offers.
The weak inflationary pressure from the retail sector may ease the pressure on the Bank of England to put up interest rates. The Consumer Price Index rose by just 1.5 per cent in July, down from 1.6 per cent in August. The volume of retail sales grew by 0.4 per cent on July, in line with analysts’ expectations and a recovery from the previous month when sales were flat.
There was a boom for furniture stores, with sales up 23 per cent on last year, the biggest jump since records began in 1988. The ONS reported that sales were also lifted by shoppers snapping up high powered vacuum cleaners in advance of new European energy saving regulations imposed at the end of last month.
Analysts said that these sales were likely linked to the booming housing market. “It underlines that if housing does cool off into next year then some of the buoyancy of consumer spending and hence overall growth will fade” said Alan Clarke of Scotiabank.
The Council of Mortgage Lenders reported this morning that mortgage lending grew by £18.6bn in August, up 13 per cent on August last year and the highest total for the month since 2008. But the CML’s chief economist, Bob Pannell warned there was likely to be a “gentle slowing” of lending activity due to tighter lending rules imposed earlier this year by regulators.Reuse content