Shop prices fall but rate of decline starts to slow

According to the BRC-Nielsen Shop Price Index, shop prices were down 1.4% in December.

However, the decline is the smallest annual drop since August 2015 and the majority of categories had a month-on-month increase.

Clothing and footwear prices increased for the first time in nearly two years, up 1.1% on November.

DIY, gardening and hardware prices increased 1% while furniture and floor covering prices were up 1.1%, both reversing previously negative trends.

However, health and beauty product prices fell unexpectedly in December.

The category had become more expensive over the year but dropped 0.3% in the month.

Nielsen head of retail and business insight Mike Watkins said: “While the supermarket price war helped food prices to fall in the run-up to Christmas, we are now seeing the first impact of the currency depreciation of the last six months, with increases in retail prices for some non-foods such as clothing.

“Over the next six months we can expect the return of shop price inflation but as the battle for the wallet of the shopper is so intense, this will be phased in by retailers and any increases are likely to be less than other sectors of consumer spend as measured by the consumer price index.”