London shop prices up 2.9 per cent in December

However, while annual shop price inflation was consistently higher in 2007 than the previous year, December’s increase was slightly below November’s 3 per cent rise. Inflation in the UK as a whole fell to a 1 per cent annual rate.

London shop prices rose 0.4 per cent month on month between November and December, compared with 0.2 per cent between October and November. Despite the unusually early discounting seen among the non-food sector in December, rates continue to rise due to inflationary pressures from the food sector, according to the LRC.

The rise in food sector prices is predicted to continue, as global food market pressures force retailers to increase prices to match the growing cost of commodities.

LRC director-general Kevin Hawkins said: “With customers strapped for cash, retailers in London started discounting earlier than usual in December. Inflationary pressures from food remained, dampening promotional activity within that sector.

“Much of the discounting came from retailers selling big-ticket items like furniture and domestic appliances. With consumers facing higher energy and mortgage costs, the Bank of England should cut rates again to give much-needed relief to both consumers and retailers,” he said.

The latest figures from the LRC follow the British Retail Consortium’s publication earlier this week, which revealed that sales growth for Christmas 2007 was the lowest in three years.