Shop prices continued to ease in February, industry research showed on Wednesday, as locked down retailers looked to shore up sales by discounting goods.
According to the latest BRC-Nielsen shop price index, shop prices fell in February by 2.4% year-on-year, below January’s decrease of 2.2%. It is the lowest deflation rate since May 2020, and below both the 12-month and six-month average, for falls of 1.7% and 1.8% respectively.
Driving the fall was non-food prices, which slid 3.9% following a 3.6% decline in January. Food inflation held steady at 0.2%, the lowest rate for the category since January 2017.
Mike Watkins, head of retailer and business insight at Nielsen, said: “With the national lockdown continuing, prices across fashion and clothing retailers continue to fall ahead do the anticipated re-opening of stores in April.
“However, for grocery retailers, despite basket spends growing by over 25% and volume sales up 4% since the start of the year, more shoppers are looking to stretch their budget.”
Helen Dickinson, chief executive of the British Retail Consortium, said: “With the third lockdown constricting consumer spending across all income brackets, many retailers have been vigorously discounting products in an attempt to encourage additional spending.
“Meanwhile, despite Brexit related costs, food inflation remained steady thanks to fierce competition between grocers to maintain their. Market share amid declining incomes for some UK households.”
However, Dickinson warned that higher prices were likely in the coming months, thanks to a combination of rising global food prices, higher shipping costs and Brexit-related red tape. “Many retailers are already under great financial strain due to ongoing forced closures and restrictions, and some will not be in a position to continue to absorb all of these added costs.”
The BRC is calling on the chancellor to use Wednesday’s budget to help the sector, by extending targeted business rates relief, extending the moratorium on debt enforcement and lifting state aid limits on lockdown grants.
The BRC-Nielsen shop price index also found that fresh food prices fell for the third consecutive month in February, by 0.8%, while ambient food inflation slowed to 1.6% from 1.7% a month earlier, the lowest rate for the category for two years.
