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UK shop prices in deflation

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Overall shop prices in May reported annual deflation for the first time in more than three and a half years, falling 0.1 per cent on a year earlier, data released today has shown.

According to the British Retail Consortium (BRC)-Nielsen Shop Price Index, food inflation fell to 2.4 per cent last month, down 0.5 per cent on a month earlier while non-food reported annual deflation of 1.5 per cent during May.

Commenting on the results, BRC Director General Helen Dickinson said: “This news bears out yesterday’s sales figures, which showed that retailers used a range of promotions and offers to drive demand and shift seasonal stock which didn’t sell well during the prolonged cold snap earlier in Spring.

“Non-food deflation accelerated to its lowest level in almost four years, a reflection of the intense competition to capitalise on improving consumer confidence and the late onset of warmer weather.

“Widespread discounting in the furniture sector drove strong sales as customers were feeling more positive about making major purchases but still on the hunt for a good deal.

“Promotional activity was also a key factor behind food inflation slowing to its lowest level since June 2010.”

A fall in commodity costs such as wheat and corn drove the decrease in food inflation, easing pressure on the prices of everyday essentials such as bread and meat and Dickinson believes that retailers are taking current market conditions into account and continuing to offer value for money.

“With a squeeze on real incomes continuing in 2013, falling shop prices will be welcomed by cash-strapped shoppers,” agreed Head of Retailer and Business Insight at Nielsen Mike Watkins.

“However, with levels of recent consumer spend also being impacted by the weather, there continues to be a dependency by many retailers to use vouchers or coupons to drive footfall.

“Nevertheless, with food inflation slowing as we finally start Summer, the outlook for the next three months is looking much brighter.”

Published on Wednesday 05 June by Editorial Assistant

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