Deflation grips shops through Christmas sales

SHOP prices dropped at the fastest pace for at least seven years this Christmas, as retailers struggled to capitalise on 2013’s increasing consumer confidence.

According to the British Retail Consortium (BRC) and Nielsen, shop prices slipped by 0.8 per cent during December, driven by a 2.3 per cent drop in non-food prices. Retailers have now grappled against eight straight months of deflation.

The rising cost of food prevented a larger overall drop in shop prices, with a 1.7 per cent increase from the December last year.

However, BRC director general Helen Dickinson suggests that food prices may be muted in the months ahead: “Food inflation fell to its lowest level since June 2010, driven mainly by significant easing of prices for fresh and ambient goods. With few signs of volatility in the supply chain at present, I would expect retailers to continue helping to keep the cost of living down, with prices settling at relatively low levels in the coming months.”

Clothing and footwear sales prices dropped furthest of all non-food items, falling by 9.9 per cent from the same period last year. Prices for electrical goods also slipped by more than average, with a 3.5 per cent decline.