Member Article

Shop price inflation reaches two-year low

The lowest shop price inflation rate in more than two years was recorded in January, according to the British Retail Consortium (BRC).

Overall, inflation fell to 0.6% from 1.5% in December, while food inflation went down to 4.0% and non-food decreased by 1.4% after being “broadly flat” over the previous month.

On Tuesday, BRC said sales values in January were “encouraging” as retail sales grew 1.9% year-on-year and showed the highest like-for-like growth for 13 months.

Online sales also increased by 10.1% over January 2012 when they rose by 11.3%.

BRC’s consortium director general, Helen Dickinson, commented: “The significant year-on-year fall in non-food prices was driven by cheaper clothing and electricals.

“Promotions were not as widespread as last year, a higher proportion of goods was sold at full price boosting sales figures but, where discounts were applied, they were deeper.

“Offers are common at this time of year, as retailers clear stock to make way for spring and summer ranges, but we’ve not seen non-food fall this quickly since September 2009.

“Weak demand for clothing necessitated big price cuts. Clothing prices were down 7.7 per cent on the year before, their biggest drop in the six years of this survey. But clothing suffered its worst sales fall since last Easter.

“Food inflation was marginally down on the previous month, a reflection of easing commodity costs filtering through and better fresh food prices.

“There is some volatility in the system but, barring any major shocks in the supply chain, I still expect stable food inflation as the year goes on.

“Overall shop price inflation is at its lowest since November 2009, helping counter much bigger increases in other household costs which are undermining customers’ spending power.

“With consumer confidence creeping up, retailers will be hoping for an increased willingness to buy more than just immediate needs.”

Mike Watkins, head of retailer and business insight at Nielsen added: “With the traditional high street January sales being replaced by year-round discounting, it`s no surprise to see a continuation of deflation in non-food, particularly in clothing and footwear where half-price reductions have been used to attract shoppers post-Christmas.

“For food retailers, despite seasonal promotions coming to an end, food inflation has remained steady at around four per cent.

“This is perhaps a positive sign that the industry is managing the impact of any cost inflation coming through the supply chain.”

This was posted in Bdaily's Members' News section by Miranda Dobson .