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U.K. Shop-Price Inflation Slows as Clothes Costs Drop, BRC Says

March 7 (Bloomberg) -- U.K. shop-price inflation slowed to the lowest in just under two years in February as clothing and electrical-goods stores cut prices to drum up demand from consumers, the British Retail Consortium said.

Retail prices rose 1.2 percent from a year earlier, the least since March 2010, compared with a 1.4 percent gain in January, the trade group and Nielsen Co. said in an e-mailed report in London today. Non-food prices fell 0.7 percent from a year earlier, the first decline in more than two years.

U.K. stores are lowering prices to lure shoppers whose confidence is being undermined by a sluggish economic recovery and rising unemployment. While inflation is cooling, it remains above the Bank of England’s 2 percent target and higher oil prices have lifted gasoline costs.

“Promotional activity has been sustained over the last three months as consumer confidence remains fragile,” said Mike Watkins, senior manager of retail services at Nielsen. “Retailers are having to work hard to encourage customers.”

The Bank of England will maintain its bond-purchase program this week after increasing it by 50 billion pounds ($79 billion) to 325 billion pounds last month, according to a survey of economists by Bloomberg News. Policy makers have said they expect consumer demand to pick up later this year as cooling inflation eases the squeeze on consumers.

The BRC report showed that food-price inflation accelerated to 4.2 percent in February from 3.7 percent in January. Within the non-food category, prices for clothes and shoes fell 5.2 percent compared with a year earlier.

Hiring Accelerates

Separately, KPMG LLP and the Recruitment and Employment Confederation said their index of hiring of full-time staff rose to a nine-month high of 53.2 in February from 51.2 in January. An index of hiring of temporary workers slipped to 49 from 49.4. Readings below 50 indicate contraction.

Visa Europe said consumer spending rose 0.2 percent in February from January and was down 1.7 percent from a year earlier. In the quarter through February, spending fell 1.3 percent compared with the previous three months.

Steve Perry, commercial director at Visa Europe, said while the monthly increase indicates the economy “may be slowly returning to growth,” there is still “a way to go before we can talk of a full recovery.”

To contact the reporters on this story: Fergal O’Brien in London at fobrien@bloomberg.net; Scott Hamilton in London at shamilton8@bloomberg.net

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

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