Shop price inflation sees modest rise as retailers discount heavily

DESPITE the January increase in VAT, shop price inflation rose a modest 0.2 per cent on the month as retailers offset the hike through heavy discounting and promotions, according to fresh data from the British Retail Consortium (BRC).

Annual shop price inflation now stands at 2.3 per cent. Food inflation slowed for the first time since August 2009 to 2.9 per cent from 3.7 per cent. This has largely been driven by a slowdown in fresh food inflation, particularly for meat and milk, the BRC said. But non-food inflation accelerated to 1.9 per cent from 1.4 per cent, which was its highest annual inflation rate since the series began in December 2006 – but this is much lower than the consumer prices index (CPI).

Stephen Robertson, British Retail Consortium director general, said: “January’s VAT increase was lost among a huge number of discounts and promotions. We would have expected non-food inflation to be higher because of the VAT rate reversal, but many shops held off passing the extra costs onto their customers.

He added: “Fierce competition, in the face of weakening consumer demand and uncertainty about the recovery, is keeping shop prices down.”