Helen Dickinson, head of retail at KPMG comments on the latest UK inflation figures from the Office for National Statistics:
“Whilst the fall in headline inflation reflects the continued easing of fuel and energy prices, it is also a consequence of the deep discounting drive undertaken by retailers in the lead up to Christmas, which saw prices of goods drastically cut.
“Retailers were forced to discount earlier and more deeply than usual to drive demand as they faced the pressure of a slow build up to the peak weeks of just before and after Christmas. Although December's retail sales performance was better than many had predicted, achieving these sales came at a price. Retailers’ discounting has hit their margins hard, causing the overall health of the sector to deteriorate over the last quarter of 2011 as a whole. Retail health is now considered to be poorer than it was in the depths of the 2008 banking crisis and recession according to the KPMG/Ipsos Retail Think Tank.
“Looking forward we expect significant price competition to continue whilst consumer demand remains weak, and this will have a knock on effect on headline inflation figures.
“Overall headline inflation, which remains above retail price inflation, should continue to fall over the coming months as the VAT rate difference falls out of the year on year comparisons, and energy and petrol prices continue to head in a downward direction.”
Notes to editors:
For press enquiries please contact
Zoe Sheppard, PR Manager at KPMG: +44 (0)117 905 4337
KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with over 11,000 partners and staff. The UK firm recorded a turnover of £1.7 billion in the year ended September 2011. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. We operate in 152 countries and have 145,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. KPMG International provides no client services.