Shop Prices fell by 1.6% in August compared to a decrease of 1.3% in July, with non-food prices falling by 3.4% compared to 2.9% in July and food inflation easing to 1.3%. All are below the 12 and six-month average price decreases.
However, announcing the figures, the British Retail Consortium (BRC) also warned that much of these drops were being driven by retailer discounts to drive people to spend. It also said that looming Brexit would force up costs, which more than likely would be passed on to the consumer.
Helen Dickinson OBE, Chief Executive, British Retail Consortium, says: “Consumers will welcome another month of falling prices in shops. The faster rate of decline was driven by cheaper Non-Food goods, as many retailers have continued to run promotions and sales in order to entice customers to spend and make up for lost ground during lockdown. Meanwhile, the availability of fresh, seasonal produce has allowed food inflation to ease.”
She adds: “However, these lower prices are already under threat from increased costs associated with implementing coronavirus safety measures and are certain to rise if the UK ends the transition period without a trade deal with the EU. The absence of a tariff-free deal will lead to higher prices for consumers as thin retail margins force retailers to raise prices in response to higher import costs. Furthermore, without a deal that reduces checks and red-tape, the UK supply chain faces severe disruption, reducing the availability of goods and further raising prices for consumers. It is essential that the Government ensures the British public are front of mind in their negotiations, otherwise it will be consumers, retailers and the UK economy that will suffer.”
Mike Watkins, Head of Retailer and Business Insight, Nielsen, concludes: “With millions of families choosing to holiday in the UK this summer, supermarket sales remain buoyant with sales of fresh foods showing an uptick, helped by hot weather earlier in the month and slowing inflation as seasonal produce becomes available. This has offset some of the increases in ambient food and drink. However, deflation continues in much of non-food with retailers still unsure about the levels of demand for next seasons’ ranges.”
Falling prices and discounting are helping shoppers back to stores, as is increasing confidence in the safety of going out. Recent research from EY finds that consumers comfortable going to a shopping mall has risen from 15% in May to 36% in July, and those comfortable trying on clothes has risen from 8% to 19%. Similarly, in May, 25% of UK consumers said they felt comfortable shopping in a grocery store, and in the July EY Future Consumer Index, that figure rose to 56%.
The survey of over 1,000 UK consumers found that UK consumer behaviour is changing as the pandemic progresses. Over the longer term, 56% intend to shop less frequently but spend more when they do shop, while 69% say they will be more mindful of hygiene and sanitation when shopping in person.
Silvia Rindone, EY UK&I Retail Partner, comments: “Retailers must be given credit for the active role that they have played. Consumers are much more hygiene conscious when they physically go shopping, and retailers have worked hard to respond by ensuring a variety of measures are in place to enable a safe shopping experience. This approach, taken together with bolstered online offerings, is clearly working, as the latest ONS figures show retail sales volumes have returned to pre-pandemic levels.”