As consumers remain wary about excessive spending, shops are increasingly lowering their prices as a means of shifting stock and encouraging customers back through their doors. This has seen prices fall for the 18th consecutive month, according to new data from the British Retail Consortium (BRC).
Unsurprisingly, supermarkets played a major part in last month’s deflation, with the cost of fresh food such as milk, vegetables and cheese falling at their steepest rate for the past eight years.
The record 0.4 per cent drop marks the first time fresh food prices have fallen since February 2010, stagnating the growth of overall food prices which rose by just 0.1 per cent compared to last October.
During October, overall prices on all items fell by 1.9 per cent when compared to the same period a year earlier, sparking concerns about retailers managing to maintain profit margins as the year draws to a close.
However, this is good news for consumers, especially as the falling price of commodities will ensure shop prices remain low for the foreseeable future.
BRC director general Helen Dickinson believes the current conditions will encourage consumers to spend a little more this Christmas.
She says; “With a backdrop of falling commodity prices, cheaper imports and benign inflationary pressure in the supply chain, we expect the great deals to continue in the medium term bar any supply chain shocks.
“With the current competitive environment, retailers are passing most of these savings on to consumers.
“As Christmas swiftly approaches, there is plenty of evidence to suggest that budgets will go a little bit further this year.”
DIY and gardening stores also pushed prices down during the month, with the deepest level of deflation in this area recorded since records began.
Clothing and footwear, similarly, continued their trend of ever-declining prices which is now approaching double digit percentage price drops – although this could be explained by the launch of autumn and winter collections coinciding with the burst of unseasonably warm weather during September.
Consistent drops in prices will allow consumers to finally believe their money is going further – an outlook which has recently been suppressed by stagnant wage growth – which the BRC believes will translate into a higher degree of spending on luxury and big ticket items as the festive season kicks in.
In the report, the BRC said; “Weak inflation, further jobs growth, stronger earnings growth and low inflation expectations should all support the recovery in consumer spending through the rest of this year.”
If this additional spending materialises, it will confirm the optimism that retailers have expressed about the prospects of a bumper Christmas.
