BRC: Marginal Decline In Headline Inflation In February

Responding to the latest CPI inflation figures, which show headline inflation falling to 2.8% and food inflation remaining unchanged at 3.3%, Kris Hamer, Director of Insight of the British Retail Consortium, said:

“Headline inflation fell marginally in February, driven by marginal drops in housing and household services and clothing and footwear entering deflation. Despite continued cost pressures, namely energy price volatility, food inflation remained unchanged. There was good news as some dairy products such as milk, cheese and eggs all saw price drops on the month. Heavy clothing and footwear discounting continued into February, as fashion sales continue to suffer due to unseasonal weather throughout the month.

“Retail operates on tight margins and it would be impossible to absorb all £5bn of new costs which hit the industry in April. Food inflation has jumped significantly in recent months and is forecast to hit 5% by the end of 2025 as a result of the costs arising from the Budget. On top of this, retailers are still burdened by an outdated business rates system. It is vital that the government’s reform of business rates doesn’t impose additional costs onto retailers. Reform must leave no shop paying more.”

Adam Deasy, Economist at PwC, comments:

“Inflation continues to keep forecasters on their toes. After a surprise jump last month to 3%, inflation has come in below expectations at 2.8% for the 12 months to February 2025. Clothing was the largest downward contributor, where prices fell from January to February for the first time since 2021, with recreation and furniture also bringing the figure down.

“This piece of good news may still represent a temporary breather. April’s usual round of regulated price changes are expected to push inflation higher again in the near term, services inflation remains high, staying at 5%, and global geopolitical uncertainty is ever-present. Inflation expectations can be a self-fulfilling prophecy and those expectations are on the rise. 

“This data is a step in the right direction for the Bank, but it remains a single step. The potential need to support growth in the UK will also be a factor when they next meet in May. Today’s release comes ahead of the Chancellor’s Spring Statement at lunchtime and a likely downward revision to GDP growth forecasts from the OBR. Should next month’s data releases spell out a similar story on both fronts, the likelihood of the quarterly rate-cutting continuing is high. For now, it's still a waiting game.”

Source : BRC, PwC

Image : Dilok Klaisataporn / iStock / 1414982888

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