U.K. Shop-Price Inflation Cools to Slowest This Year, BRC Says

U.K. shop-price inflation eased to the slowest this year in October as flagging consumer demand and competition among supermarkets pushed down food costs, the British Retail Consortium said.

Retail prices rose 2.1 percent from a year earlier, down from 2.7 percent in September, the trade group and Nielsen Co. said in an e-mailed report in London today. A separate report from KPMG LLP showed hiring of permanent staff fell last month for the first time in more than two years.

Slowing inflation may provide comfort to consumers hit by the government’s budget squeeze and unemployment at a 15-year high. Tesco Plc (TSCO), Britain’s largest supermarket chain, cut prices of 3,000 basic items such as milk and vegetables in September. The BRC said “hard-pressed households are clearly benefiting” from competition between supermarkets.

“Christmas shopping is now under way and shoppers are having to make their spending money go further,” Mike Watkins, senior manager of retail services at Nielsen, said in the statement. Retailers are “offering more discounts than last year and food retailers in particular are looking to encourage loyalty of shoppers.”

BRC said store prices fell 0.3 percent in October from September as food costs dropped 0.5 percent, a decline last exceeded in August 2009. Annual food-price inflation eased to 4.2 percent from 5 percent. While U.K. consumer-price inflation accelerated to 5.2 percent in September, the Bank of England forecasts it will ease toward its 2 percent target through 2012.

The central bank will probably maintain its target for asset purchases at 275 billion pounds ($442 billion) this week after expanding it last month, according to all 38 economists in a Bloomberg News survey. It will also hold its key interest rate at a record-low 0.5 percent, according to a separate poll.

KPMG and the Recruitment and Employment Confederation said an index of hiring of full-time staff dropped to 49.7 in October from 51.2 the previous month, the first reading below 50 since July 2009. A measure of demand for temporary staff rose to 52 from 50.9. A result below 50 indicates a decrease.

To contact the reporter on this story: Fergal O’Brien in London at fobrien@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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