Shop prices show promising signs of upward trend

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)

Overall shop prices reported deflation of 1.4% in December, a deceleration from the 1.7% fall in the previous two months.

A report has shown 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.

Helen Dickinson, chief executive of the British Retail Consortium, who produced the report, noted that non-food categories in particular saw month-on-month price increases, with clothing seeing month-on-month inflation for the first time in nearly two years.

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Dickinson explained that although it is early days, the group expects to see the general trend in inflation to be upwards over 2017.

She said: “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.”

Mike Watkins, head of retailer and business insight at Nielsen, commented: “Consumer demand has been increasingly difficult to predict in recent weeks and retailers continued to hold back on price increases in December to ensure a strong end to the year.

“However, whilst the supermarket price war helped food prices to fall in the run up to Christmas, we are now seeing the first impact of the currency depreciation of the last six months, with increases in retail prices for some non-foods such as clothing.”

Watkins concluded that over the next six months we can expect the return of shop price inflation but as the battle for the wallet of the shopper is so intense, this will be phased in by retailers and any increases are likely to be less than other sectors of consumer spend as measured by the consumer price index.

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