Clothing and footwear prices rises fuel UK inflation

Prices in British shops fell last month by the smallest margin since mid-2015, in a further sign that rising costs linked to June's Brexit vote are feeding into high street prices, an industry survey showed on Wednesday.

Shop prices fell 1.4 percent, the smallest annual drop since August 2015 and compared with a 1.7 percent decline in November, the British Retail Consortium (BRC) said.

It repeated its forecast that shop prices would soon begin to rise for the first time since 2013.

The Bank of England forecast in November that official consumer price inflation would surge to about 2.8 percent by mid-2018, as sterling's plunge after Britain's vote to leave the EU pushes up import costs and squeezes household spending.

The BRC reported that falling food prices pulled down shop prices overall in December, as they had done through most of 2016.

Although the BRC cautioned that the data can be distorted by the timing of seasonal discounts, there were signs inflation pressure was starting to build for products other than food.

Clothing and footwear prices rose month-on-month for the first time in almost two years, the BRC said, chiming with official data that showed prices for these goods provided the biggest boost to the annual inflation rate in November.

"We are now seeing the first impact of the currency depreciation of the last six months," said Mike Watkins, a senior analyst at market research company Nielsen, which compiles the BRC survey.

Watkins said rising shop prices would be offset at least partly by intense competition among retailers.

The latest official inflation data showed higher costs for technology goods and motor fuel contributed to a 1.2 percent annual rise in consumer prices during November - the biggest increase since October 2014.

Manufacturers such as Apple have increased prices in Britain to reflect the fall in sterling since the Brexit vote.