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Shop prices keep falling and falling due to “intense competition”

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Shop prices fell again last month driven by commodity weakness, global economic woes and retailer promotions.

The latest British Retail Consortium-Nielsen Shop Index revealed that overall prices dropped 1.4 per cent in August – marking the 28th consecutive month of falling prices.

It found that food prices actually rose 0.2 per cent during the month, up marginally from the 0.1 per cent rise in July but that non-food deflation accelerated further to 2.4 per cent from 2.3 per cent in July.

Clothing retailers made big cuts as each discounted heavily during the month in an attempt to shift stock, with prices falling on average by 5.4 per cent. Furniture and flooring saw a sharp deceleration in deflation to 1.2 per cent – but great deals for shoppers could be found in books, stationery and home entertainment with prices throughout this category down by an average of 5.2 per cent.

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BRC director general Helen Dickinson said the overall price drop was “good news” for consumers and had resulted from intense competition and falling commodity prices.

“Annual food prices rose for a second month but once again the rise was marginal and is likely to be a temporary fluctuation in a longer term downward trend driven by ongoing competition,” she said. 

“The latest Consumer Price Index inflation rate turned positive, after hovering around zero for the last six months. Although this inflation rate – which includes services, utilities, leisure and petrol – could fall back again, partly due to the drop in the price of oil, which has slumped by nearly a quarter in the past two months. A relatively benign economic environment and a fiercely competitive market will see retailers continue to respond to their customers with prices and promotions to maintain market share.”

Mike Watkins, head of Retailer and Business Insight at Nielsen, said: “Consumer confidence continues to increase but many shoppers are still unable or unwilling to spend freely, so retailers are continuing to offer high levels of promotions and price cuts. The underlying trend is for price deflation across both food and non-food retail and with shoppers now back from summer holidays we can expect some good deals and attractive pricing for shoppers over the next few weeks.“

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