Shop price deflation comes home
The BRC-Nielsen Shop Price Index reported annual shop price deflation of 0.1% in August, the first time the index has shown deflation since February 2007.It has been driven by a sharp fall in food inflation during the last six months. In August, food inflation fell to 2.3%, marking the fifth consecutive month it has slowed down.
On a month-on-month basis prices were broadly flat in August after falling 0.1% in July.
The BRC's Director General, Stephen Robertson, said: “Deflation has arrived. Overall shop prices are cheaper than a year ago for the first time since February 2007.
“The fall has been driven by a huge drop in food inflation - which is now less than a quarter of what it was last August. This reduction is largely due to commodity prices, such as oil and wheat, falling since last summer's peak to much lower levels.
“Non-food goods have now been cheaper than a year ago for nine consecutive months. Electricals, clothing and footwear prices have seen the biggest falls. Falling prices are good news for customers and could give a much-needed boost to retail sales.”
Mike Watkins, Senior Manager, Retailer Services, Nielsen comments: “Food inflation has slowed dramatically over the last six months and at 2.3% is at the same level as it was two years ago. Most of the global commodity price increases of last summer have now fed-through to shelf prices, but there is still some cost price inflation in ambient food as a result of past falls in sterling.
“With retailers increasingly using price cuts as the prime promotion mechanic, we can expect further downward pressure on shop prices especially in food, over the next few weeks.“
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