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Inflation sticks at 4%, retail industry reacts

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The latest data from the Office for National Statistics (ONS) showed inflation remained at 4% in January, unchanged from December, with furniture and food prices falling.

“Counteracting effects” of rising gas and electricity prices and decreasing prices of furniture and household goods, as well as food prices, resulted in inflation sticking for the first month of 2024.

“It seems that retailers are set for at least another few months of uncertainty,” noted Josh Graham, co-founder and chief marketing officer at Airtime Rewards.

“With consumer finances still squeezed, we’ll see continued reluctance around spending above and beyond the cost of day to day living, as shoppers demand more value for their purchases. In line with this, retailers must continue to think creatively about how to build exceptional experiences – both online and in-store – to entice customers, incentivise them to part with their cash, and cater to their increasingly cost-conscious needs.”

Rich Bayer, UK country manager, Clearpay, commented: “The reality is that regardless of today’s inflation figures, UK consumers are still keeping a close eye on their spending. Inflation is easing, not ending – as evidenced by January’s lower-than-expected performance across the retail sector.

“So, how do online retailers ensure they continue to attract customers? Prioritise consumer choice and leverage payment technology. It’s no surprise that Buy Now, Pay Later has become a staple budget management tool for shoppers of all ages. Research revealed that nearly one in three UK consumers have used it in the 12 months to August ’23. What’s more, 78% of consumers reported finding BNPL cheaper than other credit options – further highlighting the attraction it holds for them at the till.

“Although the worst inflation rates are now hopefully behind us, retailers should continue to seek solutions from payment technology partners that provide flexibility to shoppers. Their need to budget and spend responsibly won’t disappear overnight, and the more retailers can leverage technology that facilitates this, the better.”

Andy Mielczarek, founder and CEO of SmartSave, a Chetwood Financial company, added: “Inflation’s not budging, but today’s data does at least defy many experts’ prediction of another rise. Either way, it will all fuel the ongoing discussion around when the Bank of England will start cutting the base rate.

“But there’s still a considerable distance to cover before the Bank’s 2% inflation target is reached. At this time, those in a position to save lump sums should be proactive, capitalising on any potential advantages presented by the heightened base rate. The Bank of England’s next interest rates decision comes on 21 March, and all eyes will be firmly on how the battle against inflation shapes up over the intervening six weeks.”

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