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Thursday 09 April 2020

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Weak demand forces further promotions

Written by Peter Walker
26/02/20

Shop prices fell by 0.6 per cent in February, compared to a 0.3 per cent decrease in January, according to the latest British Retail Consortium (BRC) and Nielsen figures.

Non-food prices fell at a higher pace, down 1.9 per cent this month - compared to a 1.5 per cent drop in January - and the highest rate since May 2018.

Food inflation was steady at 1.6 per cent in February, while fresh food inflation eased to 0.6 per cent - from 0.7 per cent in January - the lowest inflation rate for the category since March 2018. Meanwhile, ambient food inflation accelerated to three per cent - up from 2.8 per cent in January -the highest inflation rate since April 2019.

BRC chief executive Helen Dickinson said that the shop price decline was driven by weak consumer demand and intense competition, which led many retailers to prolong their January sales.

“There are currently huge cost pressures bearing down on retailers, including business taxes, the Apprenticeship Levy and rising wages,” she commented. “The upcoming Budget presents an excellent opportunity to address the broken business rates system, starting with transitional relief, which has forced retailers to subsidise other industries by nearly £500 million since 2017.”

Mike Watkins, head of retailer insight at Nielsen, added: "Whilst there was a slight increase in food prices this month, this is not going to change how we shop or what we buy, as the wider concerns that consumers have about their own finances continue to make them cautious about spending.

“But if consumer price inflation increases further over the next few months and if sales growths remain weak, then more retailers may need to compensate with extra promotions and deeper price cuts.“


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