The UK retail sector has reported deflation for the thirteenth consecutive month, with non-food hit the hardest, according to the BRC-Nielson Price Index for May 2014.
Inflation on food has dropped to 0.7% – the lowest figure ever recorded – whilst non-food deflation accelerated to 2.8%, from 2.7% last month. The drop was fuelled by competition between retailers to offer the best bargains and deals, particularly over the May Bank Holiday.
Despite the figures, it’s not all doom and gloom for retailers and consumers. “Food inflation remaining at its lowest level since our records began is great news for hard-pressed households as the summer approaches, and confirms that retailers are responding to current conditions by matching attractive offers with those products most in demand at this time of the year,” said Helen Dickinson, Director General of the British Retail Consortium (BRC). “Further evidence that consumer confidence is steadily improving was picked up by the GfK index, which is now at a nine year high. The everyday low prices offered by retailers have clearly played a role in the rise of household spending.”
Mike Watkins, Head of Retailer and Business Insight, Nielsen, said: “Food inflation is still low, many supermarkets are price cutting and non-food prices remain deflationary, so the high street continues to generate little inflationary pressure. Little in the way of immediate seasonal or weather related price increases is anticipated so the outlook for the next three months is for relatively stable shop price inflation. Helped by the increases in consumer confidence since the start of the year, this should encourage shoppers to spend more freely over the summer months.”