Retailers face “stark” challenges as deflation hit 4-year low

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Shop prices threaten to slip back into inflation for a third consecutive month in November, decreasing marginally by 0.1 per cent.

According to the British Retail Consortium (BRC) and Nielsen Shop Price Index, this rate of deflation marks the shallowest in four years, as retailers struggle to keep prices down against a backdrop of rising imports and decreased spending power.

Fortunately for many ahead of the Christmas period, both food and fresh food inflation fell back in line with global prices, dropping to 1.5 per cent and 1.3 per cent respectively and down from 2.2 per cent in October.

This contrasts with non-food deflation, which saw deflation rates slow from 1.5 per cent a month prior to 1.1 per cent, the lowest rate in over four years.

“The lower projections for consumer spending that came from the Office for Budget Responsibility’s downbeat forecast last week, and uplifts in labour costs, conjure up a perfect storm of economic pressures looming over an industry that’s already fiercely competitive,” BRC chief executive Helen Dickinson said.

“That’s why we were pleased that the Chancellor listened to us and others and brought forward the switch from RPI to CPI indexation on business rates – not the fundamental reform needed but an important step forward which will undoubtedly ease some of the pressure and enable retailers to continue with some investment which would otherwise have been threatened.

“However against a backdrop of higher import costs and a tightening squeeze on discretionary spending power, the challenges to the industry remain stark.”

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