Prices at retail shops decrease for the first time in nearly three years
With the ‘summer of sport’ in full swing, UK retailers took advantage by introducing additional price reductions in August to stimulate sales.
This month marked the first decline in shop prices in nearly three years, as retailers heavily discounted their summer inventory of fashion and household items.
According to the latest data from the British Retail Consortium (BRC) and NielsenIQ, shop prices experienced deflation of 0.3 percent, a decrease from 0.2 percent in July.
Deflation occurs when the overall price level for products and services decreases, resulting in an inflation rate below 0 percent.
In August, the annual growth in shop prices was below the three-month average rate of 0 percent, remaining at its lowest point since October 2021.
BRC Chief Executive Helen Dickinson attributed the decline in shop prices in August to non-food deflation and substantial discounts on summer merchandise.
“This discounting follows a challenging summer of trading due to unfavorable weather conditions and the ongoing cost of living pressures affecting many households,” stated Dickinson.
Prices
Consumers witnessed a 2 percent decrease in food prices, marking the lowest inflation rate since November 2021.
The cost of both fresh and ambient foods fell below the three-month average rates.
“Food inflation decreased with fresh food prices, particularly fruit, meat, and fish, experiencing the most significant monthly drop since December 2020 as supplier input costs diminished,” Dickinson explained.
Non-food inflation reached its lowest point since July 2021, with prices maintaining a deflation rate of -1.5 percent, a further decline from -0.9 percent in the previous month.
Dickinson expressed that families would be pleased to see a reduction in prices for certain products. Retailers are expected to continue their efforts to keep prices low.
The BRC highlighted the uncertainty surrounding commodity prices, attributed to climate change impacting domestic and global harvests, along with escalating geopolitical tensions.
Dickinson cautioned that the UK could face renewed inflationary pressures in the coming year.
Millions of Britons engaged in major sporting events over the summer, such as the UEFA Euro 2024 tournament, Wimbledon, and the Olympics in Paris. To drive additional sales during the ‘summer of sport,’ retailers introduced more price cuts in August.
Mike Watkins, head of retailer and business insight at NielsenIQ, noted that many non-food retailers continued promotional support due to unpredictable weather conditions.
Consumer Attitudes and Interest Rate
According to GfK’s Consumer Confidence Index, which measures various consumer attitudes, expectations regarding the UK’s economy decreased this month for the first time since February.
However, there was a three-point increase in the Major Purchase Index, indicating that more consumers viewed it as an opportune time to make significant purchases.
This uptick is positive news for retailers and indicates that a larger number of shoppers believe it is a favorable time to make big-ticket purchases.
GfK reported that consumers exhibited a positive outlook regarding their personal financial situations over the next year, possibly influenced by a mortgage-friendly interest rate cut at the start of August.
The decision was well-received by the British Independent Retail Association (BIRA), which believes it will offer much-needed relief to independent retailers and consumers alike, potentially stimulating spending and investment in the retail sector.
