UK retail prices drop for third consecutive month

The drop in overall shop prices matched the shallowest rate of shop price deflation for the last four years

Inflation increases are being absorbed by retailers (Getty)

Shop prices in the UK edged down by an annual 0.1 per cent for the third month in a row during November, according to a survey that chimed with the Bank of England’s thinking that inflation may have peaked around now.

Although prices for non-food goods declined at the slowest rate since May 2013, food price inflation cooled this month, Retail Consortium (BRC) and market research firm Nielsen said.

Still, the 0.1 per cent drop in overall shop prices matched the shallowest rate of shop price deflation for the last four years.

After raising interest rates for the first time in 10 years earlier this month, the Bank of England said it thought consumer price inflation - pushed up by the pound’s fall after last year’s Brexit vote - had probably peaked around now.

Although inflation looks set to run above the BoE’s 2 per cent target for the next few years, most economists say they do not expect the BoE to raise rates again until 2019.

“Many inflationary increases are still being absorbed by retailers and are not being passed on to the consumer in the form of higher prices,” said Mike Watkins, head of retailer and business insight at Nielsen.

Price pressures among non-food retailers had been higher than for food vendors, the BRC said, reflecting the expiration of currency hedging contracts that had allowed them to protect customers from the inflationary effect of sterling’s plunge last year.

The official measure of consumer price inflation unexpectedly held steady at 3.0 per cent in October.

Reuters