LONDON (Reuters) – January discounts dragged on British shop prices last month but cost pressures linked to the decision by voters to leave the European Union gathered steam, an industry survey showed on Wednesday.
The British Retail Consortium (BRC) said shop prices fell 1.7 percent last month compared with a year ago after a 1.4 percent decline in December.
“Fluctuations in the monthly figures belie an underlying trend of building cost pressures that are gradually feeding through from the fall in sterling combined with higher commodity prices,” said Helen Dickinson, chief executive of the BRC.
“This will inevitably mean that we start to see a general upward trend in inflation over 2017.”
The Bank of England expects inflation to rise above its 2 percent target in the coming months, pushed up largely by the fall in the value of the pound since June’s Brexit vote.
However, economists predict the BoE will not raise interest rates until 2019 at the earliest because of an expected slowdown in the economy caused by the reduced spending power for consumers and lower business investment.
Recent business surveys have pointed to surging price pressures for firms in the services, manufacturing and construction sectors.