Cost of living eases for UK families as shop prices deflate for 16th consecutive month

UK economy has become dominated by debt driven household and government spending

UK retail industry trade association the British Retail Consortium (BRC) published its BRC-Nielsen Shop Price Index (SPI) on Wednesday, which revealed that overall shop prices in the UK deflated for the sixteenth consecutive month, decelerating to 1.6% in August from 1.9% in July 2014, to break a four month declining trend.

SPI data collated and analysed by information and measurement company Nielsen to give an accurate picture of the inflation rate of 500 high street products that are most commonly bought in retail outlets each month, including superstores, town centre department stores, local parade stores and shopping centre retail outlets.

Seven main sectors of purchase are included in the index: Food, DIY, Gardening and Hardware, Furniture, Books, Stationery and Home Entertainment, Electrical, Clothing and Footwear, and Other Non-Food.

According to SPI data, Food inflation was the lowest ever recorded, standing at 0.3% in August this year. Overall Food inflation has averaged just 1.3% over the last year and 0.4% in the last quarter. Prices rose by 0.2% on a month-on-month basis, following fall of 0.7% in July. Fresh Food inflation was below the twelve month average of 1.3% in August this year, falling to 0.1% and the lowest level of inflation recorded since June 2010. On a month-on-month basis the prices rose by 0.1% after a July fall of 0.7%. Inflation of Ambient Food  prices rose to 0.6% from 0.2% in July, with a month-on-month rise by 0.5% from a 0.6% fall in July 2014.

Non-Food reported deceleration in deflation of 2.9% in August from 3.3% in July 2014. The twelve month average rate is 1.2%. Deceleration was experienced by five sub-categories in August 2014. These included DIY, Gardening and Hardware, which remained deflationary  in July with a 2.3% fall in prices over the year, under  the three month average of 1.2%. Books, Stationary and Home Entertainment prices fell by 0.4%, below the twelve month average of 0.5% but more than the three month average of 0.3%. Deflation was deeper than the category average in Clothing and Footwear, reaching 10.2% from 11.2% in July. Electricals  also experienced deflation, decelerating to 4.7% in August this year, from 5.0% in July.

Health & Beauty and Other Non-Food were the only categories that experienced inflation, however the figures for Health & Beauty were at an annual flat rate of just 0.7% in August, while Other Non-Food annual inflation was recorded as 0.4%, down from 0.7% in July this year.

There was a deceleration in deflation in the Furniture and Floorcoverings category to 0.3%, from 2.7% in July. This was above both the twelve and three month averages of 1.7% and 1.5% respectively. Although house textiles inflated, the furniture, furnishing and carpet category deflated in August.

On a month-on-month basis, Non-Food prices rose by 0.6% from a 0.8% fall in July.

British Retail Consortium director general, Helen Dickinson, commented: “Shop prices reported deflation of 1.6 per cent in August and marked sixteen consecutive months of falling shop prices for consumers. Clearly retailers are continuing to help drive down the overall inflation rate (Consumer Price Index).

“The summer months saw retailers provide plenty of attractive offers on fresh food goods which saw their lowest level of inflation this year, with vegetables, fish and also milk, cheese and eggs contributing to the downward pressure. Big-ticket goods that we tend to associate with the summer, gardening, electricals, DIY, furniture and floorcovering, helped to sustain low prices.

“What’s more, as the UK economy continues to pick up, the benefits of subdued cost increases – oil and commodity prices remained relatively flat over the first half of the year – incurred by retailers will be passed on to customers.

“While the Bank of England’s recent estimates suggest that retailers margins are still below pre-crisis levels, retailers will take heart from an outlook for costs that is broadly encouraging.

“Meanwhile the industry will keep building the solid foundations for growth in consumer spending”.

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