Steep price cuts in furniture and fashion have driven retail prices in Britain down this month, though the broader rate of decline has begun to slow.
According to the British Retail Consortium (BRC) and market research firm NielsenIQ, shop prices slipped by 0.7% year-on-year in January—less than the 1% annual fall recorded in December.
Helen Dickinson, chief executive of the BRC, explained the trend: “Extensive January sales were good news for bargain hunters, but less good news for retailers needing to shift excess stock.” The non-food sector, which includes furniture and fashion, recorded a 1.8% year-on-year decline, compared to a 2.4% drop in December when Black Friday deals enticed Christmas shoppers.
Food price inflation eased to 1.6% from 1.8%, with fresh food inflation dipping to 0.9% from 1.2%. However, ambient food products—tinned and dried goods—experienced a month-on-month rise of 1%, led by sugar, chocolates and alcohol. The annual ambient inflation rate still edged down to 2.5% from 2.8%.
Despite the current discounting, Dickinson warned that price cuts “may not last much longer” as retailers face £7bn of new costs announced in the budget. Higher national insurance contributions for employers, the increased National Living Wage and a new packaging levy are all expected to push up prices.
The BRC’s figures often foreshadow the Office for National Statistics’ (ONS) Consumer Price Index (CPI), which dropped unexpectedly to 2.5% in December. The next CPI data, covering January, is due on 19 February, with analysts forecasting a rise in inflation due to Ofgem’s energy price cap increase and new government policies. Even so, the Bank of England is widely expected to cut interest rates by 25 basis points to 4.5% at its 6 February meeting, reflecting the UK’s sluggish economic growth.