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Inflationary pressures squeezing suppliers are beginning to filter through to the supermarkets as food price deflation slowed significantly in November.

The latest BRC – Nielsen shop price index showed overall deflation remained unchanged last month at 1.7% as non-food deflation accelerated to 2.3% in the run up to Black Friday after falling 2.1% in the previous two months.

However, falls in food prices slowed sharply from a 1.2% drop in October to 0.8% in November. Fresh food deflation decelerated to 1.2% from the 2% fall in October while ambient remained unchanged at 0.1%.

Mike Watkins, head of retailer and business insight at Nielsen, said: “Shop prices are still falling and deflation will continue to at least the end of the year, as the result of the battle for the wallet of Christmas shoppers.

“Looking ahead, we can expect a slow return to shop price inflation during 2017 with fresh foods, some of which are also seasonal and weather dependent, likely to be impacted sooner when increased supply chain costs finally begin to filter through to retail prices.

“However, retailers will keep running promotions and campaigns to encourage retail spend and this will continue to help shoppers to save money next year.”

British Retail Consortium CEO Helen Dickinson added that November took the run of shop price deflation into its 43rd month.

“These figures once again point to retailers’ effectiveness in controlling the inflationary pressure that continues to build through the devaluation of the pound,” she said.

“We have still yet to see any visible impact from the weaker pound on shop prices, but we do expect to see a gradual slowing of the rate of deflation. Increasingly value-driven and informed customers mean retailers will have to remain highly competitive. So while we may start to see cost pressures beginning to feed through into prices next year, we don’t expect any sudden spikes or surges, and the timing and extent of increases will differ from one category and retailer to the next.”

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A meeting between frozen food retailer Iceland and the Icelandic government failed to thaw relations in the naming row. A statement from the government of Iceland said that Iceland Foods refused to relinquish exclusive control of the word “Iceland” and presented proposals that “fell short” of Iceland’s expectations. Legal action to invalidate the exclusive registration of the wordmark ‘Iceland’ held by Iceland Foods at the European Union Intellectual Property Office that started in November will proceed.

“The registration of a country name that enjoys highly positive national branding to a private company defies logic and is untenable as it hinders companies and entities to register their products with their country of origin,” the government said. “This issue is a matter of principle with important global implications for trade in goods and services and Icelandic authorities will bring it up at the relevant international level.”

Iceland founder and CEO Malcolm Walker said: “We very much regret that the Icelandic government was not willing to hold any serious discussion with us on ways in which we might co-operate to our mutual benefit.”

Private sector growth remained steady in the three months to November, according to the CBI’s latest Growth Indicator. The survey of 715 respondents across the manufacturing, distribution and service sectors showed the pace of growth rose to a balance of +9%, compared with +8% in the three months to October. Performance across the sectors was mixed, however, with retailers and consumer facing companies reporting a rise in growth, whilst manufacturers saw a slower pace of growth. Growth in business and professional services, meanwhile, was broadly flat for a second month.

CBI chief economist Rain Newton-Smith said: “It’s encouraging to see that growth in the private sector continues to perk up, and that steady growth is expected as we head into 2017. The high street has had a good month, even before we see the impact of Black Friday and Christmas shopping, whilst our manufacturers and services sector are seeing subdued growth.”

Almost 6,000 restaurant companies have at least a 30% chance of going insolvent within the next three years as Brexit raises costs and disposable incomes stagnate, accountancy firm Moore Stephens has warned. Sharp fall in the value of sterling since the Brexit vote has added to the pressure on the sector by increasing the cost of imports for restaurants.

Mike Finch, restructuring partner at Moore Stephens, said: “It’s been a tough year for many restaurants in the face of rising costs and fierce competition. It is unrealistic to expect UK restaurant groups to avoid the impact of the fall in the pound by substituting for UK produce – they are going to face a big hit. Restaurants have to make tough decisions as to how much they try to pass on to consumers; too much and they risk losing business, too little and they lose margin.”

The FTSE 100 defied the turmoil in Italy to open up 0.8% to 6,785.86 points. Italian prime minister Mattei Renzi resigned after his proposed changes were voted down in last night’s referendum.

Greencore (GNC), Tesco (TSCO) and Unilever (ULVR) have all made strong gains so far, climbing 2.2% to 283.2p, 1.9% to 210.8p and 1.2% to 3,148.5p. Britvic (BVIC) has opened 0.7% down at 529.5p but the majority of food and drink stocks are up so far.

This week in the City

It’s a quiet looking week on the markets as we head into the festive season.

Real Good Food is set to report its half-year numbers on Tuesday and update on how its turnaround efforts are going since the sale of its troubled sugar business.

And Associated British Foods holds its AGM on Friday.

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