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Shop price inflation rises in December

Shop inflation rose sharply in December to 2.2%, from 0.2% in November, according to the BRC Nielsen Shop Price Index.

The passing of the first anniversary of the 15% VAT rate, effectively cutting its downward effect on inflation, was blamed for much of the rise. Non-food inflation rose to 1.4% from -1.2% in November, making the month the first for non-food inflation since December 2008.

BRC director general Stephen Robertson said:  “With December being the first and only month where the 15% VAT rate was the same as a year earlier, a shop price inflation rise was inevitable.”

He added: “VAT isn’t the only issue though. Increases in the costs of oil, food commodities such as wheat and sugar and the continued weakness of the pound are also filtering through.”  

The BRC said the return to a 17.5% VAT rate on January 1 would mean further upward pressure on inflation as comparisons are made against the lower rate of the corresponding period in 2009. 

Mike Watkins, senior manager, retailer services at Nielsen, commented: “Prices fell in December 2008 as the result of the VAT reduction and, at the height of the shoppers recession, discounting in non-food was also significant. So against these comparatives, the increase in shop prices this December is no surprise.” 

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