Shop prices in the U.K. reported deflation for the tenth straight month in February, and at the fastest pace on record, as food inflation dropped sharply and retailers resorted to heavy discounting on apparels and electrical goods, a report from the British Retail Consortium (BRC) showed Wednesday.
The February data suggests that consumer price inflation is set to remain low in the coming months, with many of the larger food retailers cutting prices and investing heavily in promotions, BRC said.
The shop price index dropped 1.4 percent on an annual basis, after falling 1 percent in the beginning of the year. Economists had forecast a weaker decline of 1.1 percent for February.
The contraction was the biggest since the series began in 2006, and indicated the longest sustained period of price decreases ever recorded.
Influencing the deflation, food inflation eased to an all-time low of 1.1 percent in February from 1.5 percent in January. At the same time, non-food prices decreased 3 percent, after falling 2.7 percent.
"Many of the larger food retailers have been looking closely at their investment in promotions and price cuts, suggesting competition could intensify further," BRC Director General Helen Dickinson said. "It is clear that retailers' hard work to keep prices low for UK consumers is having considerable success."
The BRC further noted that it expects shop price inflation to remain below consumer price inflation for the immediate future.
Today's data is consistent with the GfK NOP consumer confidence survey for February, which showed that sentiment stayed steady at the highest level in more than six years as personal financial expectations improved amid the broadening economic recovery.
Last month, the Distributive Trades Survey by the Confederation of British Industry (CBI) showed that high street sales in the U.K. grew at the fastest pace since June 2012, indicating positive trend in households' spending pattern.
The British economy expanded 0.7 percent in the three months to December from a quarter ago, when the GDP grew 0.8 percent. In the year 2013, the economy expanded 1.8 percent.
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