UK shop prices fall again ahead of Christmas

By

Barbara Santamaria

Published
Oct 31, 2018

After two months of mild inflation, shop prices fell again in October, with non-food deflation deepening to 1.1% from 0.9% in September as low consumer spending forced clothing retailers to keep prices down.

On a year-on-year basis, shop prices for both food and non-food items decreased by 0.2%, according to the latest BRC- Nielsen Shop Price Index.

“As we approach the Christmas period, retailers are facing stiff competition; driving down the prices of many goods including clothing and electricals. This comes at a particularly difficult time, with lower consumer demand, a weak pound and rising public policy costs all putting pressure on retail margins,” commented Helen Dickinson, chief executive of the British Retail Consortium.

Changes to promotional strategies had pushed non-food prices up in recent months, but further drops are expected in the next quarter as retailers launch Halloween and Black Friday deal and their Christmas campaign.

“The inflationary cost pressures in the supply chains are being managed by the industry which tempered the recent upward pressure of shop price inflation in October,” said Mike Watkins, head of retailer and business insight at Nielsen.

“Non-food continues to show deflation with discounting continuing, especially within discretionary items. Consumers remain uncertain about when and where to spend and with Christmas promotions now kicking in, competition for share of wallet will intensify in both food and non-food retailing.”

The results underscore the challenges facing UK retailers this year. Just last week, national chain Debenhams announced plans to close 50 stores, joining a string of other retailers who are downsizing their property portfolio amid tough trading conditions.