Britain's inflation rate fell sharply to 0.3 per cent in November from 0.7 per cent in October, according to official data, as Black Friday sales and lower clothing and footwear prices helped push down the rate.
Clothing and footwear prices, which fell by the most in a decade, made the biggest contribution to the decline, according to the Office for National Statistics, in a month when most of the country was in some form of lockdown.
The sharp fall in inflation “came as a bit of a surprise” said Ruth Gregory, senior UK economist at Capital Economics.
“Some of these moves should be reversed in the coming months. The dip in clothing inflation was at least partly driven by Black Friday discounts lasting for longer than usual. And many accommodation prices were not available during the second lockdown and so were estimated using the overall inflation rate," she said
UK inflation is now close to the almost five-year low of 0.2 per cent in August and way off the Bank of England's 2 per cent target.
The central bank announces its December interest rate decision on Thursday and is likely to note the weakness of inflation after it had predicted last month that the figure would come in around 0.5 per cent.
“Inflation has had the wind knocked out of its sails again at what was supposed to be a critical time for retail, but in fact was coloured chiefly by a renewed lockdown in England,” said Richard Pearson, director at investment platform EQi.
"Falling clothing and food prices will reflect some discounting efforts while shoppers were stuck at home, but the index remains well below the Bank of England’s target.”
Clothing and footwear prices contracted 2.6 per cent last month, and were 3.6 per cent lower than in the same month a year earlier, the biggest annual decline since January 2010.
Clothing sales have struggled in Britain since the start of the pandemic with several major high street clothing retailers, such as Arcadia and Debenhams, falling into financial difficulties, putting thousands of jobs at risk.
Falling prices for food and non-alcoholic beverages also contributed to the inflation drop, with a decline of 0.2 per cent between October and November, while other downward contributions were smaller, with transport prices falling 0.04 per cent.
Ms Gregory said the decline in food inflation was unexpected, as it came despite the boost to demand for food in supermarkets during the second Covid-19 lockdown.
However, games, toys and hobbies increased in price, partly offsetting the declines from other retail sales.
Looking ahead, Ruth Gregory said some of the factors affecting November’s inflation rate were temporary, such as the Black Friday sales, so she expects the figure to rise towards the 2 per cent target for next year.
“Beyond that, though, the slack in the economy should keep underlying price pressures subdued and allow inflation to drop back to 1.5 per cent in 2022. That is unless a ‘no deal’ Brexit pushes it up to a peak of 3-4 per cent,” she said.
Mr Pearson said next year could see inflation “bounce back with a vengeance”.
“A Brexit supply shock and rapidly reheating economy, pumped up by the vaccine, will almost certainly create material price rises as demand reignites,” he said.