By Ian McConnell
Business Editor
ANNUAL UK inflation plummeted to 0.3 per cent in November from 0.7% the previous month, as clothing prices dropped, official figures show.
The Office for National Statistics noted the fall in prices in the clothing and footwear category last month contrasted with the usual pattern of a rise between October and November.
It said: “The price fall in November this year reflects increased discounting and there have been media reports that some Black Friday sales may have spread further across the month.”
Clothing and footwear prices dropped by 2.6% between October and November, having risen by 1% between the same two months of last year.
The ONS also cited a large downward impact on the overall annual inflation rate from a 0.2% fall in prices in the food and non-alcoholic beverages category between October and November, in contrast to a 0.8% rise between the same two months a year earlier.
It said: “The effect came from across a wide range of food and drink categories, but particularly sugar confectionery, vegetables and meat, from products such as large bars of chocolate, ice cream, cauliflower, premium potato crisps and cooked ham.”
The annual inflation rate is way adrift of the 2% target set for the Bank of England by the Treasury.
Howard Archer, chief economic adviser to the EY ITEM Club think-tank, noted inflation also continued to be limited by the temporary value-added tax cut for the hospitality sector.
He said: “Very low inflation is supportive to consumers’ purchasing power amid rising unemployment and the prospect of limited pay increases.”
Mulling the outlook, he added: “Price-conscious consumers, excess capacity, limited earnings and curtailed economic activity are likely to limit inflation in the near term at least...
“Inflation will rise in 2021 once the temporary VAT cut for the hospitality sector ends in March. Unfavourable base effects resulting from the fall in oil prices in early 2020 will also have an upward impact. An expected gradual firming of the recovery from early 2021 could also have some upward impact on inflation, but it is unlikely to rise quickly and could be around 2% by the end of 2021.”
He forecast a no-deal Brexit could see annual inflation “reach 3% during 2021...due to a net upward impact from tariffs and a likely marked weakening of sterling”.
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