UK: Prices fall as discounts continue
10:10 06 August 2014
Shoppers saw the deepest level of deflation for eight years last month as retailers continue to discount groceries, clothes and electrical goods.
Prices fell for the 15th month in a row to hit 1.9% in July from 1.8% a month earlier, according to the British Retail Consortium/Nielsen shop price index.
The survey’s authors said this was the deepest level of deflation since they began collecting this data in December 2006.
Food price inflation fell to 0.3% from 0.6% 12 months ago, as major supermarkets such as Tesco and Morrisons cut prices to fight off competition from discounters Aldi and Lidl in a bid to retain market share.
British Retail Consortium director general Helen Dickinson said: “This is great news for households who are benefiting from fierce competition within the industry at a time when disposable incomes remain under pressure.
“The lowest ever recorded food inflation will be particularly welcomed by the lowest income households who typically spend around a third of their expenditure on food.”
The report pointed out that the majority of agricultural commodity prices fell during the first half of the year, which, combined with a strong pound, kept prices down.
But Ms Dickinson added that falling prices meant challenging conditions for retailers as margins were squeezed, while other costs such as business rates continued to rise.
Price pressure on non-food retailers eased slightly, with the overall rate of decline decelerating to 3.3% last month from 3.4% a year ago.
However, some of the sharpest price falls still came in the non-food sector with prices among clothing retailers slumping 11.2% over the year, while electrical goods fell 5% over the same period.
Nielsen’s head of retailer and business insight Mike Watkins said non-food retailers were “maintaining the level and depth of price cuts and promotions to help drive footfall” over the summer holiday season.