A Christmas cheer for retailers as inflation falls

UK inflation has fallen more than expected and will boost consumer spending as the cost of fuel and food declines.

In response to the latest Consumer Price Index (CPI) inflation figures, which indicate a decrease in headline inflation to 3.9 percent, Helen Dickinson, Chief Executive of the British Retail Consortium, emphasized the impact of intense competition among retailers in restraining price hikes for consumers. Notably, with a continued softening in clothing and footwear inflation, underscoring retailers' concerted efforts to provide an affordable holiday season for households.

Dickinson cautioned about potential inflationary risks in 2024, citing looming challenges such as higher business rates in April, new EU border checks, and a National Living Wage hike. She stressed the necessity for the government to carefully evaluate the cumulative impact of its policies, encompassing proposed initiatives like the deposit return scheme and the new packaging levy. Failure to address these factors could lead to a resurgence in the cost of doing business, ultimately reverberating through inflationary pressures.

While inflation has significantly declined from its 2022 peak, it remains nearly twice the Bank of England's 2 percent target, as reported by the BBC. A decrease in inflation doesn't imply that most goods and services have become more affordable; instead, it indicates that prices are experiencing a slower rate of increase.