Yahoo Finance Coronavirus: Second lockdown slows UK inflation to a crawl as clothing stores slash prices
Price growth across the UK slowed to almost nothing last month, as second lockdowns across much of the UK dampened demand.
Data published by the Office for National Statistics (ONS) on Wednesday showed consumer price inflation dipped to 0.3% in November.
The data undershot economists’ forecasts of 0.6% and was well down on October’s reading of 0.7%.
The ONS said inflation was weighed down by falling prices for clothing, food and non-alcoholic beverages.
“Throughout 2020, we have seen clothing and footwear prices follow a different pattern compared with previous years,” the stats body said.
“We recorded increased discounting during March and April, probably in response to the lockdown, then prices were relatively stable (compared with previous years) to August. Between August and October, prices broadly increased as usual, but this has been followed by a fall between October and November, whereas prices tend to rise between these two months.”
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The ONS said longer Black Friday sales may have contributed to falling clothing and footwear prices.
“Black Friday occurs every year, but this time around discounts were particularly steep in clothing sales, which led to an unseasonal fall in prices,” said Laith Khalaf, a financial analyst at stockbroker AJ Bell.
“That highlights the continued pressure on the retail sector, and while price cuts on the shelves are good for consumers, they don’t bode well for profits.”
Games, toys and hobby items all saw prices rise as Brits began Christmas shopping. The largest upward contribution to price rises came from recreation and culture — items such as computer games.
When housing costs are included, annual inflation was 0.6% last month. Both measures of inflation fell by 0.1% on a monthly basis.
Consumer price inflation measures the growth or decline in price of a typical basket of goods and services — everything from supermarket shopping to TV streaming subscriptions.
The ONS said 72 items usually in the basket were unavailable in November due to lockdowns, accounting for 13.9% of the basket by weight.
“The number has increased from eight in October but is down from 90 in April, the first full month of lockdown,” the stats body said.
Consumer price inflation has crashed since the onset of the COVID-19 pandemic in March, well undershooting the Bank of England’s 2% target.
“The broader picture remains one of low inflation and that spells low interest rates for the foreseeable,” Khalaf said.
Inflation is a key measure of economic health as its rate can influence the speed at which economies grow. Ed Monk, associate director of personal investing at Fidelity International, said November’s data was “another sign of the economy losing steam.”
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