January 8, 2014 12:17 am

Steepest annual fall in UK shop prices for seven years

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Shop prices fell last month at their steepest annual rate for at least seven years in a boon for Britain’s squeezed shoppers, according to industry data.

The British Retail Consortium’s shop price index, which it derives from the prices retailers charge for 500 popular items, was 0.8 per cent lower in December than the same month a year ago. This implies the steepest deflation in shop prices since the index started in 2006, the BRC said.

Competitive discounting among retailers in the run-up to Christmas, combined with lower inflation in the food supply chain, propelled the fall.

Official statistics also point to lower inflationary pressures on the high street, though they do not point to outright deflation. The Office for National Statistics’ “implied annual deflator” for its retail sales data, a measure of shop price inflation, was 0.6 per cent in November, down from a peak of 5.4 per cent in mid-2011.

Overall UK inflation has also come down sharply to 2.1 per cent in November from a peak of 5.2 per cent in September 2011, helping to ease the pressure on Britons’ real incomes. It has outstripped wage growth for several years, pushing living standards to their lowest in a decade. In spite of this, consumer spending has revived over the past six months, helping the economy to recover.

Helen Dickinson, the BRC’s director-general, said the fall in the industry price index was “good news for cash-conscious customers and confirms our predictions that retailers worked hard to help budgets go that bit further this Christmas.”

Barring any supply chain shocks, the BRC expects shop prices to settle at these lower levels in the coming months. However, recent surveys of manufacturers and other service sector firms have suggested some companies are planning to increase their prices.

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