Consumers’ purchasing power boosted by deflation, January BRC-Nielsen Shop Price Index shows

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Overall shop prices reported deflation of 1.8% in January from 2.0% in December, according to the latest BRC-Nielsen Shop Price Index.

Food reported annual inflation of 0.1% in January up from the 0.3% decline seen in December. This is the first move into inflationary territory since August 2015.

On a 12-month average basis, the Shop Price Index reported deflation of 1.8%.Non-food deflation remained at 3.0% for the second consecutive month.

BRC chief executive, Helen Dickinson, said: “Shop prices fell by 1.8 % last month compared to January 2015 as a result of continuing intense competition and retailers’ ongoing investment in price. This is in line with what we have seen over the last 12 months.

“January marked the 33rd month of falling shop prices and the 34th month of non-food price drops. Non-food prices saw an impressive 3.0% drop for the second consecutive month, driven largely by reductions in clothing, footwear, books, DIY, stationery and home entertainment.

“Food prices increased by 0.1 % compared to the 0.3% drop in December, marking the first rise since August 2015. We will have to wait for next month’s figures to see whether this is a one-off blip or whether after a sustained period of price falls food prices are beginning to stabilise.

“Higher levels of consumer confidence are currently translating into other parts of consumer spending – in leisure, entertainment and eating out – rather than into shopping which is providing the backdrop to a tough trading environment for retailers but great news for shoppers.”

Mike Watkins, head of retailer and business Insight, Nielsen, said: “Sales momentum in January has been slow for some retailers with shoppers seeking out the best prices online and in store, and this competition is helping keep non-food shop prices lower than a year ago. Many seasonal lines have also come off promotion which will have moved food prices upwards a little, but there is still no general upward pressure on prices, despite recent currency appreciations. Looking ahead, we expect overall shop price deflation to remain broadly unchanged for next few months.”