Shop prices up in December despite festive discounting

Price rises could be on the way
Price rises could be on the way

Shop prices rose at their highest rate since 2013 in December, despite retailers slapping deep discounts on products during the critical Christmas trading period.

Figures from the BRC-Nielsen Shop Price Index show that overall inflation accelerated to 0.3% last month compared to a year ago, and up from 0.1% in November - the fourth month of inflation in five years and the highest since April 2013.

The increase was driven by slowing deflation in general merchandise and the rising cost of ambient food, which saw prices increase to 2.3% in December, up from 2.1% in November.

Non-food deflation decelerated to 0.4% from 0.8% in November, the lowest rate of decline since March 2013.

The BRC said that this is the result of the collapse in the pound following the Brexit vote feeding through and a change in the promotional strategies deployed by retailers.

Sterling’s Brexit-induced capitulation has seen the cost of imports rocket, which is feeding through to shop prices.

BRC boss Helen Dickinson said the figures underline the tough conditions retailers are facing, adding that a no-deal Brexit will see prices rocket.

“Shoppers may have become accustomed to great value, but Brexit uncertainty means that a continuation of the low prices is by no means guaranteed.

“Without a trade deal, the cost of importing many of the goods we buy day to day will go up significantly, and retailers simply do not have the room in their margins to protect consumers from those costs.

“Unless Parliament comes together behind a deal that ensures frictionless, tariff-free trade we could see prices paid by UK households rise substantially,” she said.

The data, which covers early December, also showed that food price inflation decelerated to 1.5% in December from 1.6% in November.

Fresh food inflation also slowed to 0.9% in December, down from 1.2% in November, which the BRC put down to lower international prices.

Mike Watkins, head of retailer and business insight at Nielsen, said: “With an uncertain economic outlook, retailers had to work hard to encourage customers to keep shopping, and in the run-up to Christmas price discounting was deeper and began earlier across both food and non-food channels.”