Shop prices deflationary for 22nd consecutive month, BRC-Nielsen Shop Price Index shows

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Overall shop prices reported deflation for the 22nd consecutive month, accelerating to 1.7% in February, after reporting deflation of 1.3% in January, according to the BRC-Nielsen Shop Price Index.

Food reported annual deflation of 0.4% in February from a 0.5% fall in January.

On a 12-month average basis the Shop Price Index reported deflation of 1.7%.

Non-food deflation accelerated to 2.5% in February from 1.8% in January.

BRC director general, Helen Dickinson, said: “Prices in Britain’s shops continue to fall, this month by -1.7 per cent.  That’s in line with the twelve-month average and has been largely driven by falling prices of non-food items.

“Those shoppers enjoying the January sales could continue into February with great bargains on the high street, especially for clothing. It was also worth a visit to the local DIY store or updating some house furniture with good promotions found in both categories.

“Food prices fell for the second month in a row, as fresh food edged down to its lowest level on record with milk, cheese, eggs, vegetables and convenience food all cheaper than they were a year ago.  Meanwhile, there was a very small rise for ambient-food.

“The other notable rise this month was the price of crude oil which has halved in recent times but is starting to edge up slightly with a barrel now costing around $60 dollars. It’s too early to determine whether this upward trend will continue and what effect that will have on the cost of production. The good news is that the latest Producer Price Index (which tracks the cost of raw materials to producers) reported a further fall, meaning retail businesses continue to see significant decreases in their own input costs.

“The fiercely competitive market will see retailers continuingly responding to their customers with keen prices and promotions to maintain market share.”

Mike Watkins, head of retailer and business insight, Nielsen, said: “Since the start of the year, we have seen some very competitive pricing across both the food and non-food channels and this is helping to keep prices low for shoppers. With many commodity prices still falling, if shoppers can be encouraged to spend more, then retailers will be looking for volume sales increases over the next few months. The challenge for food retailers is that in store promotions also remain close to an all-time high at 33% of sales and the use of vouchers or coupons continues, making consumer demand rather unpredictable. Even so, shoppers are seeing a double benefit of price cuts and promotional offers.”