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Europe Retail News

Shop price deflation remains at four-year low

In October, Shop Prices decreased at the same annual rate as in September. The 0.1% deflation is the shallowest deflation rate in the last four years.

The deflation of Non-Food products was 1.5%, also the same rate as September.

Food prices recorded the same increase as in September, of 2.2%.

Fresh Food inflation accelerated to 2.2% in October from 1.8% in September, a gain of 0.4 percentage points.

Ambient Food inflation eased in October to 2.2% from 2.7% in September.

Helen Dickinson OBE, Chief Executive, British Retail Consortium:

“Shop Price inflation remains unchanged from last month, just inside deflationary territory. While still falling year on year, the SPI is a measure focussed on basic, entry level goods, so any upward movement in inflation indicates mounting inflationary pressures elsewhere in the consumer spending basket.

“Forces on inflation are pulling in both directions. On the one hand global food prices continue to head upwards at the same time as the weaker pound has left retailers facing significantly higher bills for imported goods. On the other hand, the tightening squeeze on discretionary spending power is reducing the ability of retailers to pass on increased import costs.

“These dynamics are playing out differently across the industry. Food inflation remains firmly in positive territory, while Electronics recorded year on year inflation this month, for the first time since the SPI began in 2006. However, a sharp increase in promotional activity, in order to clear stock, pushed both Clothing and Furniture further into deflation.

“This month’s figures only serve to illustrate the enormous challenges of the current environment. And while retailers are doing their best to provide value to keep prices low for consumers who are feeling the pinch of falling real wages, in an industry where margins are already low, the capacity to absorb further cost increases is wearing thin. That’s a particular concern as retailers face paying an additional £270m in business rates next year. We urge the Chancellor to take the opportunity in his budget this month to freeze rates in order to encourage investment, to safeguard shops in economically vulnerable communities and to enable retailers to keep prices low for the UK’s households.”

Mike Watkins, Head of Retailer and Business Insight, Nielsen:

“Disposable income is coming under pressure however consumers are benefiting from the continuation of promotional activity, the use of vouchers and price cutting, in particular by supermarkets. This is going some way towards making up any shortfalls in spending power as cost price inflation begins to impact prices. Non Food retailers have also been combating unseasonable weather and weakening consumer demand which means price points are being kept sharp for the season”

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