Store wars may help debt management efforts

Consumers struggling with their debt might find the situation is eased somewhat by a falling-off of inflation, after new data revealed the rise in the cost of goods in the shops is continuing to tail off.

Figures from the British Retail Consortium (BRC)-Nielsen Shop Price Index for November indicated the level of annual shop price inflation was two per cent, down from 2.1 per cent in October and at its lowest for a year.

BRC director-general Stephen Robertson said a battle for customers at a time of squeezed incomes has been a key factor in the trend, stating: "For a second consecutive month the supermarket price war has helped reduce food inflation."

Also, he added, commodity prices are coming down again, something that could help reduce the influence of wholesale prices on the final cost of items on the shelves.

The net effect of this will be to contribute to a lower level of inflation, which Mr Robertson noted will also be helped by the recent postponement of the fuel duty rise previously planned for January 2012, as well as VAT dropping out of the equation.

In addition to reducing the squeeze on incomes, this could help ensure the base rate stays at 0.5 per cent for longer.

The Bank of England's Monetary Policy Committee (MPC) is set to reveal its latest decision on interest rates and quantitative easing tomorrow (December 9th), but it may be very likely they will hold the rate then and for a long time to come, with the sort of inflationary pressures that may have prompted a rise now fading.

Indeed, in the minutes of the November MPC meeting it was noted members believe the peak of inflation has now passed.

Posted by Paul Thacker