Shop price deflation remains at near-record low, BRC-Nielsen Shop Price Index shows

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Overall shop prices reported deflation of 2.0% in December from the 2.1% decline seen in November, according to the latest BRC-Nielsen Shop Price Index. Food reported annual deflation of 0.3% unchanged from November’s rate. On a 12-month average basis, the Shop Price Index reported deflation of 1.7%. Non-food deflation decelerated to 3.0% from 3.3% in November.

BRC chief executive, Helen Dickinson, said: “Prices in Britain’s shops have continued to tumble, this month by 2.0%. For the last two years and eight months, customers have been able to fill their baskets, whether virtual or physical, and pay less for their goods than the year before. This is an incredible run of good fortune for shoppers who’ve been preoccupied with picking up presents for family and friends, as well as themselves ahead of the holiday season.

“With retailers continuing to invest in price, relatively low commodity prices and intense competition a hallmark of the industry, we can expect falling prices to continue in the medium term.

“A number of key commodities in the retail supply chain (in particular, oil which is now trading under $40 per barrel) have fallen dramatically recently and the impact of these falls will continue to make its way through to shop prices for some time to come.

“December also marked the 33rd month of non-food price drops. Non-food prices fell by 3.0% – albeit down from 3.3% in November – driven largely by reductions in clothing, footwear, electricals, DIY, gardening and hardware prices. For the 4th consecutive month all non-food categories saw prices fall. While food prices saw less movement, falling by 0.3%.

“Although trading statements are starting to filter through, we will have to wait until next week to learn if the lower priced goods have translated into positive sales for the market as a whole during the all-important Christmas trading period.”

Mike Watkins, head of retailer and business insight, Nielsen, said: “We can expect the current levels of deflation across the retail industry to continue for the first half of 2016. There is little upward inflationary momentum from global commodity or oil prices and locally, the price war in food retailing looks set to continue. After the unseasonably mild autumn and early winter, many non-food retailers will use price cuts and targeted promotions early in the year, to help sell through and to benefit from any rise in real wages.”