Competition continues to drive shop price deflation in July

DARTFORD, ENGLAND - SEPTEMBER 02:  Shoppers walk on the High Street on September 2, 2013 in Dartford, England. High Street campaigner Mary Portas is today facing questions from Members of Parliament on the communities and local government select committee. The traditional high street is under increasing pressure due to the recession and the rise of on-line shopping.  (Photo by Peter Macdiarmid/Getty Images)

Shop prices continued to fall in July as competition between retailers remain strong.

Overall shop prices reported deflation of 1.6% in July, from the 2.0% decline in June, according to the BRC-Neilson Shop Price Index. This is above the 12-month average of 1.8%.

Non-food deflation decelerated to 2.2% in July, from 2.8% in June. This is above the 12-month average of 2.8%. Food deflation remained at 0.8% for the second consecutive month.

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The food index is currently at its deepest rate for over three and a half years, while the non-food index is the lowest on record.

Chief executive British Retail Consortium chief executive Helen Dickinson comments: “The long stretch of deflation continued in July with shop prices falling once again. This is testament to the strength of competition between retailers, which is as fierce as it has ever been.

“While we may have become accustomed to prices falling, it’s worth noting that this month’s figures have seen the rate of deflation decelerate. Total price falls have slowed to -1.6% from June’s -2.0%. It’s too early to say if this is the beginning of the end of sustained price deflation or whether pressures in the wider economy could merely mark the end of the beginning.”

Mike Watkins, head of retailer and business insight at Nielsen, adds: “With unpredictable weather and a change to consumer sentiment underway, we have seen retailers cut prices or increase promotional activity in the last few weeks to help top line sales growth, so it is of no surprise that shop price deflation is lower in July than in any other month this year. Once again it is clear there is currently no inflationary pressure coming from retail and discounting looks set to be a catalyst to stimulate demand in the coming months.”

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