Shop price inflation remained unchanged at a 1.5% year-on-year pace in December, according to the latest data released today by the British Retail Consortium (BRC).

More specifically, food inflation fell to 4.1% in December from 4.6% in November. Non-food prices were broadly flat in December after falling 0.3% in November.

Helen Dickinson, British Retail Consortium Director General, said: "Food inflation fell noticeably in December. Past rises in commodity prices are still trickling through the supply chain and wet weather's hitting more crops. But most significantly, global commodity costs have eased in recent months which are helping to reduce food inflation for consumers. Barring any new shocks in the supply chain, I would expect food inflation to stabilise at this sort of level in the short term and we may see it starting to settle to lower levels in the second half of 2013."

Coincidentally, although admittedly across the pond, just last night Bloomberg cited meteorologists according to whom US drought conditions could still conceivably last for many more months and even several years if there is a repeat of the conditions seen in the 30's.

Ironically, that comes just as some food commodity prices had entered "bear market" territory after having registered falls of over 20%.

Food security is one of the main risks which has been identified for debate this year by the World Economic Forum.

"There's nothing in terms of changes in climate positions to suggest that the drought in the US is going to be short- lived," Jim Dale, senior risk meteorologist at British Weather Services, told Bloomberg in a phone interview from High Wycombe, England, citing computer models.

"Non-food inflation stayed flat in December, bringing the tally to ten months since the rate went above zero. This is thanks in no small part to electricals, footwear and clothing, popular segments of Christmas retail which continue to show consistent deflation," Dickinson added.

For his part, Mike Watkins, Senior Manager, Retailer Services, Nielsen highlighted how retailers "have become cautious about passing on price increases when demand is weak."

AB

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