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Weak demand forces further promotions as squeeze continues, warns BRC

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Promotions are impacting bottom lines
Promotions are impacting bottom lines
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Shop prices continue to fall as retailers add promotions to drive demand says BRC

In February, shop prices fell by 0.6% compared to a 0.3% decrease in January. This is below the 12- and 6-month average price decreases of 0.1% and 0.5%, respectively, warns the British Retail Consortium (BRC) as retailers are forced to make even more price cuts.

 

According to its figures, non-Food prices fell at a higher pace in February, -1.9% compared to -1.5% in January. This is below the 12-and 6-month average price declines of 1.2% and 1.6%, respectively. Non-Food prices fell at the highest rate since May 2018.

 

Food inflation was steady at 1.6% in February. This is below the 12- month average price increase of 1.7%, but above the 6-month average price increase of 1.4%. Fresh Food inflation eased to 0.6% in February from 0.7% in January. This is below the 12- and 6-month average price increases of 1.1% and 0.7%, respectively. This is the lowest inflation rate for the category since March 2018.

 

Ambient Food inflation accelerated to 3.0% in February up from 2.8% in January. This is above the 12- and 6-month average price increases of 2.5%. This is the highest inflation rate since April 2019.

 

Helen Dickinson OBE, Chief Executive, British Retail Consortium says: “Consumers will welcome the fall in shop prices, which accelerated from the previous month, with non-food prices falling at their highest rate since May 2018. This decline was driven by weak consumer demand and intense competition, which led many retailers to prolong their January sales. In contrast, some non-perishables, such as cereals, have caused overall food prices to rise. This is likely to worsen as global food prices have been growing at a double-digit rate for the past three months.”

 

She concludes: “There are currently huge cost pressures bearing down on retailers, including business taxes, the Apprenticeship Levy and rising wages. The upcoming Budget presents an excellent opportunity to address the broken business rates system, starting with transitional relief, which has forced retailers to subsidise other industries by nearly £500 million since 2017.”

 

Mike Watkins, Head of Retailer and Business Insight, Nielsen adds: "Whilst there was a slight increase in food prices this month, this is not going to change how we shop or what we buy, as the wider concerns that consumers have about their own finances continue to make them cautious about spending. But if consumer price inflation increases further over the next few months and if sales growths remain weak, then more retailers may need to compensate with extra promotions and deeper price cuts."

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