UK shop prices fall in December but also show first signs of upward trend
The figures from the British Retail Consortium and Nielsen in their monthly shop price index show that non-food deflation decelerated to 1.9%, down from 2.3% in the previous month. This is the weakest deflation rate since June 2015. Meanwhile, food deflation decelerated marginally to 0.7% in December from the 0.8% fall in November.
BRC chief executive Helen Dickinson said: “December saw an easing of shop price deflation. Prices were down 1.4% compared to last year, but the majority of the categories we monitor, particularly non-food, saw month-on-month increases in prices, with clothing and footwear seeing month-on-month inflation for the first time in nearly two years.”
The figures also reveal that fresh food deflation remained at 1.2% for the second consecutive month. In addition, the ambient food category moved into inflationary territory for the first time since June 2016, up 0.1% in December from the 0.1% decline in the previous month.
Dickinson said: “We’ve said for some time that we expect to see underlying inflationary pressures, notably from the post-referendum fall in the value of the pound, feed through into shop prices. It’s too early to confirm that this is what we’re seeing in December’s figures: timings of seasonal discounts can cause monthly fluctuations at this time of year and retailers have continued to find ways to mitigate the impact on consumers.
“However, we expect the general trend in inflation to be upwards over 2017. The magnitude of the exchange rate movement and commodity price rises combined with the increasing costs of doing business means that retailers will have little choice other than to pass on some of these rising costs into prices but effect will be lessened by the intensity of competition.”
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