The Office for National Statistics (ONS) saw was a surprise fall in inflation during November – dropping to 0.3 per cent from October’s 0.7 per cent – as retailers pushed down the costs of clothing and footwear in what some have called the ‘Black Friday effect’.
The ONS said prices in clothing & footwear fell by 2.6 per cent month-on-month, when prices usually rise.
“The price fall in November this year reflects increased discounting and there have been media reports that some Black Friday sales may have spread further across the month,” it noted.
There was also a downward contribution from food and non-alcoholic beverages, where prices fell by 0.2 per cent.
Source: ONS
Laith Khalaf, financial analyst at AJ Bell, said while Black Friday is an annual event, this year discounts had been particularly steep leading to an “unseasonal fall in prices”.
He said: “We shouldn’t set too much store by one month’s inflation figure, particularly this time around when a second national lockdown meant the statisticians weren’t able to collect all of the usual data.
“However, the broader picture remains one of low inflation and that spells low interest rates for the foreseeable.”
Khalaf (pictured) added: “We can expect inflation to tick up next spring, when the basis for comparison moves into the post-pandemic era and the big drop in fuel prices falls out of the equation in March, but that won’t be enough to persuade the Bank of England to tighten monetary policy.” 
“There are some economists who believe that the Bank’s money-printing programme will let the inflation genie out of the bottle further on down the line. The central bank has plenty of room to tighten monetary policy to rein inflation back in, but that is still a nightmarish scenario because it would mean the Bank raising interest rates while the economy was still struggling to get to its feet."
James Lynch, fixed income investment manager at Aegon Asset Management, said the surprise drop in inflation chimes with its view that inflation will not be an issue during 2021.
He said: “The risk of inflation coming through in a vicious loop of wage rises and price rises is most likely years away, and the economy has to make up the lost output gap first. It is some gap to make up, with GDP expected to be around 11 per cent lower this year.”
Lynch continued: “Supply-side inflation is possible, especially as the ‘just in time’ economy that we rely on requires a seamless supply chain. We have seen the fragility of this over the past couple of weeks, whether that be Covid-19 issues impacting the supply chain, or Brexit stockpiling.
“If that breaks down we could get a supply-side shock and therefore prices could be put up as the demand exceeds the supply. But even this should be temporary, and should not cause a long-lasting inflationary impulse.”