Lower retail prices drive shops into deflation
Prices in UK shops continued to fall in February, as discounting in retail offset high grocery prices.
Shop prices fell by 0.7 per cent year on year in February against a decline of 0.7 per cent in January, driven by a 2.1 per cent drop in retail prices.
“Discounting is still widespread in fashion as retailers tried to entice customers against a backdrop of weak demand,” Helen Dickinson, Chief Executive of the BRC, said.
But February sales were flat despite the heavy discounting, speaking to a “much reported and very concerning long-term decline in the UK high street,” Sophie Michael, Head of Retail and Wholesale at BDO, said.
Consumer confidence remains down versus last year, with a majority of Brits still “struggling with a cost-of-living crisis that is far from over,” Neil Bellamy, Consumer Insights Director at NIQ GfK, said.
Month-on-month change in UK Shop Prices
Inflation for breakfast
Food inflation increased to 2.1 per cent year on year in February after prices for fresh food like butter, cheese and eggs rose.
Dickinson warned that inflation is “likely to rise” this year due to an imminent £5bn increase in costs for retail, as well as geopolitical tensions. The BRC expected food prices to rise by four per cent by the end of the year.
Mike Watkins, Head of Retailer and Business Insight, NielsenIQ, said: “With many household bills increasing over the next few weeks, shoppers will be looking carefully at their discretionary spend and this may help keep prices lower at non-food retailers.
“However the increase in food inflation is likely to encourage even more shoppers to seek out the savings available from supermarket loyalty schemes.”
Loyalty schemes have been driving sales at supermarkets in the last few years as grocers fight to attract and retain shoppers with personalised discounts.