Highest deflation for 9 months in December

721
deflation

December gifted shoppers with the fastest rate of deflation in nine months, following months of shop prices “teetering on the edge of inflation”.

According to the latest BRC-Nielsen Shop Price Index, overall shop prices dropped 0.6 per cent in December compared to same month in 2016.

This is a stark comparison to November’s 0.1 per cent deflation, which marked the lowest level since 2013.

Despite the overall price drop, the disparity between food and non-food prices continued to grow.

Food prices increased 0.3 per cent in December. Fresh food was hardest hit by the continually expanding cost pressures, growing from 1.3 per cent to two per cent.

However, this was largely offset by non-food prices which fell at their fastest rate in a year, dropping 2.1 per cent year-on-year.

“With consumer confidence wavering and unpredictable levels of demand, many non-food retailers have been keeping prices low to stimulate spending, which will undoubtedly have come at a cost to margins,” Nielsen head of retailer insight Mike Watkins said.

“Whilst food prices have edged up a little due to supply chain increases in fresh and seasonal foods, pricing across supermarkets will remain competitive as we start 2018 with consumers still coping with higher household bills.”

Elsewhere the results weren’t so promising.

According to the BDO High Street Sales Tracker, this year marked the fifth consecutive December of declining sales, dropping 2.3 per cent.

Despite high street giant Next rallying investors with better-than-expected sales this week, fashion retail was hit the hardest enduring a 3.8 per cent decline, marking the eighth month of the year with no growth.

BDO head of retail Sophie Michael said: “Consumer confidence is low, and shoppers have exercised extreme caution or shopped strategically online, rather than visiting bricks-and-mortar stores or making impulse purchases.

“As such retailers, and in particular fashion retailers, have felt a fall in footfall and consumer spend.”

Click here to sign up to Retail Gazette‘s free daily email newsletter