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Shop prices dragged down by non-food cuts - BRC-Nielsen
Shop prices in the run up to Christmas fell at their steepest rate in eight months, led entirely by price cuts by non-food retailers as food prices continued to rise.
December prices fell 0.6% on last year, the BRC-Nielsen shop price index revealed on Friday, accelerating the rate of cuts after a 0.1% decline in November. December's fall was the deepest deflation since March 2017.
For non-food prices it was the fastest fall since January, declining 2.1% year-on-year after a slide of 1.1% in November.
Food inflation gathered steam, with inflation increasing to 1.8% in December from 1.5% in November, with fresh food inflation picking up to 2.0% from 1.3% a month earlier.
"After several months of shop prices teetering on the edge of inflation, December saw them retreat deeper into deflationary territory. Prices in December fell at the fastest rate since March this year when only last month we saw the shallowest rate of deflation for four years," said Helen Dickinson, the BRC's chief executive.
She added: "Food inflation picked-up pace this month, fuelled by climbing global food prices earlier in the year. While retailers will continue to do their best to absorb cost increases for their customers, the challenges to the industry remain stark with more inflationary pressures in the pipeline."
Nielsen's Mike Watkins noted that the SPI inflation rate is below other inflationary measures, "showing there is little inflationary pressure coming from retailers".
"With consumer confidence wavering and unpredictable levels of demand, many non-food retailers have been keeping prices low to stimulate spending, which will undoubtedly have come at a cost to margins. Whilst food prices have edged up a little due to supply chain increases in fresh and seasonal foods, pricing across Supermarkets will remain competitive as we start 2018 with consumers still coping with higher household bills."