Overall shop prices reported deflation for the 20th consecutive month, decelerating to 1.7% in December, after reporting deflation of 1.9% in November, according to the latest BRC-Nielsen Shop Price Index.
On a 12-month average basis, the Shop Price Index reported deflation of 1.6%. Non-food deflation slowed marginally to 2.8% in December from 2.9% in November.
BRC director general, Helen Dickinson, says: "Prices in Britain's shops have continued to tumble, this month by -1.7%. This is the 20th consecutive month that customers have been able to go to the shops, fill their baskets and pay less for their goods than the year before. This is an incredible run of good fortune for consumers and in the medium term at least looks set to continue. A number of key commodities in the retail supply chain (in particular, oil) have fallen dramatically recently and the impact of these falls will continue to make its way through to shop prices for some time to come.
"This significant run of deflation isn't all bad news for retailers. The Producers Price Index (which tracks the cost of raw materials to producers) is deflationary so retail business have seen significant decreases in their own input costs. However, fierce competition – the hallmark of the UK retail industry – has seen these savings passed on directly to consumers. It's a win-win scenario that many are predicting will continue long into 2015."
Mike Watkins, head of retailer and business insight, Nielsen, adds: "The high levels of discounting across most retail channels in 2014 will have given a boost to sales and the year ended with shop price inflation close to record lows in December, so it's the consumer who has been the winner all round. With little external pressure to move prices upwards and an uncertain level of consumer demand, retailers will be cautious about price increases, so we can expect a continuation of deflation for at least the first part of 2015."
