Shop prices seen stabilising
SHOP prices are expected to be less volatile for the rest of the year but January’s VAT hike to 20 per cent will put upward pressure on inflation in 2011, the British Retail Consortium will say today as it reveals that overall shop price inflation slowed to 1.5 per cent in June from 1.8 per cent in May.
Stephen Robertson, director-general of the BRC, said: “Low and stable inflation appears likely for the rest of the year. The fluctuations in commodity costs and exchange rates over the last 18 months have now fed through. Barring any major shocks, we’re not expecting sharp movements in price.”
In June, food inflation slowed to 1.7 per cent from 2.2 per cent, mostly because fresh food such as fish and vegetables were cheaper than a year ago. Non-food inflation also eased to 1.4 per cent from 1.6 per cent as items, including electricals and clothing, continue to be cheaper than they were this time last year.
The BRC expects retailers to continue to use widespread discounts and promotions.
Mike Watkins, senior manager, of retailer services at Nielsen, which jointly conducted the survey, said that retailers have been promoting and price cutting to attract shoppers into store with World Cup activity featuring in many campaigns.
But the BRC says that retailers’ thin margins means that there will be little scope for them to absorb next year’s VAT increase. This will put significant pressure on inflation from January onwards.