Fashion and non-food retailers have been keenly cutting or stablising prices to keep consumer interest alive during a tentative re-opening, but such economies may not last, warns the latest update from the British Retail Consortium (BRC).
According to its data, shop price deflation accelerated to 1.2% year-on-year in July compared to June’s decrease of 0.7%. This is a slower rate of decline than the 12- and 6-month average price decreases of 1.6% and 1.4%, respectively.
Non-Food deflation accelerated to 1.8% in July, compared to a fall of 1.0% in June. This is a slower rate of decline than the 12- and 6-month average price declines of 2.8% and 2.2%, respectively.
Food deflation also accelerated to 0.4% in July from June’s deflation of 0.2%. This is the fourth consecutive month when Food prices fell. This is below the 12- and 6-month average price changes of 0.4% and -0.2%, respectively.
But it may not last. Helen Dickinson OBE, Chief Executive, British Retail Consortium, says: “UK consumers will be pleased to see another month of falling prices at the checkout. Annual prices in July fell at a faster rate than the previous month due to fierce competition between supermarkets keeping food prices low, and the steeper fall in non-food prices. With the reopening of some holiday destinations and other recreational activities, consumers broadened their spending to include more leisure and travel. In response, non-food retailers, particular fashion businesses, have been working hard to keep consumer appetite alive with summer sales.”
She warns: “Unfortunately for consumers, low prices may not last forever. Recently, retailers have faced huge cost pressures as a result of rising costs of shipping, haulage and petrol as well as frictions from exiting the EU. The additional paperwork and physical checks on EU imports in October and January may push prices up in the long-term. Government should do all it can to minimise the impact on consumers by reducing any further frictions and costly delays where it can.”
Mike Watkins, Head of Retailer and Business Insight, NielsenIQ adds: “It’s an uncertain time for many households as the economy slowly reopens and recent NielsenIQ research shows 41% of all shoppers are watching their spend more than they did before the pandemic. So, it’s important that retailers continue to keep prices low especially as the increase in CPI is likely to lead to different shopping behaviours to help pay for the other increases in household spend.”
The news comes as the Office for National Statistics (ONS) releases figures that show that total UK retail sales have more than doubled since 1989, driven by massive growth in sales of food, sports equipment and toys and the rise of ecommerce.