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Your Money > Family Finances Articles > Supermarket scrooges
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By Sarah Modlock
Finally, something is going down instead of up. But is falling inflation - 'deflation' - good news? Official figures show that inflation is now dropping at its fastest rate for 16 years, thanks in part to falling fuel costs. The cost of air and sea transport has, in turn, reduced, along with food - although we are yet to see these costs passed onto consumers. But is there a bigger price to pay? Economists believe that short spells of deflation are not disastrous and should encourage spending. But it's a fine balance. If prices keep falling then the reverse happens - people stop buying because they wait for the prices to get even lower. This leads to a drop in demand and falls in output which causes firms to respond by cutting jobs and wages. Those people then have less to spend, demand falls further and the situation gets worse. The impact... Now for the science.....the Consumer Prices Index (CPI) measure dropped to 4.5% from 5.2% in September, while the Retail Prices Index, (RPI) the alternative measure of inflation, which includes housing costs, fell from 5% to 4.2%; the biggest fall since 2003. The RPI measure is sometimes referred to as the "headline" rate of inflation, and is often used for agreeing pay settlements, or calculating the uprating of benefits such as pensions. The Bank of England has said inflation could fall below its target of 2% next year - and might drop as low as 1%. Potentially, deflation could be bad for everyone but most urgently it concerns businesses, retailers and manufacturers which underpin our economy. The Treasury also rakes in far less Corporation Tax and VAT in deflated periods. Savers and pensioners will also suffer if the Bank of England responds by reducing interest rates - something which is many expect will happen next month with talk of a full 1% to 2%, a level not seen since the 1930s. The Prime Minister says any interest rate cuts will boost spending and the tax cuts expected in the Pre-Budget announcement will have the same effect. The Conservatives point out that tax cuts now will mean huge rises soon. The supermarket Scrooges.... Now it's official that food and transport costs are getting lower, it has become easier to spot how the supermarkets are inflating prices to make money out of our misery. There cannot be a more cynical move on their part than hiking the cost of everyday items and no-frills food, such as baked beans, to cash in credit crunch shopping habits. A tin of budget baked beans rose from 19p to 29p last month according to the Grocer magazine. The cost of a basket of 25 everyday goods went up by 2% last month in the Daily Mirror food index. James Ball, of The Grocer, said: "Our own probe found five store cupboard favourites from Sainsbury's Basics range have soared by up to 300%. In September, Basics corned beef was 76p - but now it costs £1.28. Tinned tomatoes shot up from 11p to 33p and red kidney beans from 11p in October to 18p. Basics baked beans are up from 19p to 29p and tinned spaghetti from 14p to 24p. MySupermarket.com, which helps to compile The Daily Mail Cost of Living Index, puts the annual rate of food and drink inflation at 6.2% but says the annual rate of increase in the cost of a typical shopping basket leapt to 21.3% in November - adding more than £1,100 a year to family grocery bills. And while high street stores and big banks may be suffering, supermarket chains are still enjoying huge profits. Last week, Sainsbury's reported half-yearly profits were up 13.3% to £272million - due partly to its Basics range. Tesco, Asda and Morrisons have been doing just as well. LibDem Treasury spokesman Vince Cable said: "There is clear evidence that oil, food and commodity prices are falling around the world. These should be passed on by retailers. There really is no excuse for supermarkets to take advantage of the situation to fatten up their profit margins." The National Farmers' Union accused supermarkets of demonstrating the sort of greed that triggered the banking crisis. Turkey will gobble up your cash If you were planning to eat your own bodyweight in Christmas food again this year you had better start saving hard. A 22lb family turkey will cost £70 this year and supermarket birds will cost 75% more overall than last year. Farmers blame a wet summer for damaging the grain used in turkey feed. The National Farmers Union said: "If farmers are going to continue to produce, they need to cover their costs." Stores are also charging 7% more for 25 Christmas staples compared with a year ago, say MySupermarket. Sainsbury's Christmas puddings are up from 99p to £1.19, Asda mince pies will cost £1.08 instead of 98p and their Dundee cake has gone up £1 to £3.98. Buy Cadbury's Roses from Tesco and you will pay £3.28 compared with last year's £2.75. If you're looking for value for money then consumer campaigners Which? have taken the legwork out of the mince pie rush by taste testing for you. The good news is that Netto's pies were cheapest on test (£1.19) and were rated more highly by which.co.uk than Harrods' pies which cost five times more (£5.95). Marks and Spencer's pies took pride of place at the Christmas table with a test score of 80%. They gained full marks for appearance and testers also liked the 'buttery taste', giving four out of five stars for taste and aroma. Not far behind were those produced by budget stores Netto and Aldi, and Mr Kipling - all cost under £1.50 and were also Best Buys. Some big names failed to meet which.co.uk's standard. Waitrose All Butter Mince Pies, Harrods Luxury Mince Pies, Asda Extra Special Rich Fruit Brandy Mince Pies and Sainsbury's Taste the Difference all received a fairly ordinary three stars for taste. "Nothing epitomises Christmas more than that first bite into a mince pie. And there's no need to worry about being Scrooge if you opt for a cheaper pack - the budget stores, like Netto and Aldi, are giving expensive brands a run for their money," says which? editor Jess Ross. Useful links: |
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