BRC-Nielsen: Summer starts with falling shop prices and rising optimism

Overall shop prices reported deflation of 1.3% in June up from 1.9% in May.

- Food reported annual deflation of 0.4% the lowest deflation rate since February 2015.
- On a 12-month average basis, the Shop Price Index reported deflation of 1.7%.
- Non-food deflation slowed to 1.9% in June from 2.5% in May.

BRC Director General, Helen Dickinson, said: "Shop prices fell by -1.3 per cent this month marking the 26th consecutive month of prices drops. This is a slight slowdown in falling prices when compared with recent months.

"Consumer confidence hit a 15 year high which suggests that shoppers will feel more comfortable about buying major purchases. It also suggests that consumer spending, one of the main drivers of the recovery, should remain robust over the summer.

"While non-food prices fell at a slower rate this month (-1.9 per cent against -2.5 per cent in May), June marked the 27th month of non-food deflation. Shoppers wishing to invest in their home won't be disappointed with great deals to be found in furniture and flooring and gardening and hardware in particular.

"Food has been deflationary throughout 2015 but the pace slowed in June, largely as the result of the rebound of oil prices in recent months.

"We're seeing a strong appetite for consumer credit, inflation remains at an historic low, unemployment continues to fall and wages have started to rise, the wider macro-economic data continues to be supportive for the consumer.''

Mike Watkins, Head of Retailer and Business Insight, Nielsen, said: "Retailers continue to use price cuts and promotions to stimulate sales which is helping to maintain shop price deflation, and we see little evidence to suggest that prices will rise in the near future. With many food retailers still using price cuts to attract new shoppers, this is lowering the cost of the weekly shop and so the overall CPI figure in the UK. Deflation and price led competition will continue to be a key driver of sales growth for some time yet"

Source : BRC
www.brc.org.uk/brc_news_detail.asp?id=2832