December shop prices drop as retailers chase Christmas spend

Shop prices dropped 1.8% in December, the same as the previous month, as retailers used discounting to drive Sales in the lead up to the festive season.

This was below both the 12- and SIX-month decreases of 1.4% and 1.6% respectively, according to the latest figures from the BRC and Nielsen.

Non-food prices continued to fall, down 3.2% in December, compared with a 3.7% drop in November, as shoppers focused their spend on more essential items as tier restrictions tightened across the UK.

This was below the 12-month average price decline of 3.0% but in line with the six-month average price decline of 3.2%.

Food inflation eased slightly by 0.4%, down from 1.3% in November, making it the lowest rate of inflation since March 2018, as supermarkets battled for consumer spend by offering the best value festive goods.

Fresh food prices fell by 0.9%, against a rise of 0.5% in November, which was the first fall in fresh food inflation since January 2017.

Ambient food price inflation slowed to 2.3% from 2.5% the previous month.

BRC chief executive Helen Dickinson said: “It was welcome news for shoppers in the run-up to Christmas as prices fell in December. As in November, non-food prices dropped, and retail firms who have been hardest hit by the pandemic this year, such as fashion outlets, are continuing to offer discounts.

“Notably, food inflation eased to its lowest since March 2018, with a significant fall in fresh food prices. This was largely driven by last year’s decrease in global food prices filtering through onto British shelves, as well as the fierce competition between supermarkets to offer customers the best value, quality goods in the face of testing circumstances.

Nielsen head of retailer and business insight Mike Watkins added: “Shoppers were cautious about Christmas with many expecting to spend the same or less this year, and after the disruption of the lockdowns in November non-food retail had a rollercoaster month so keeping prices low will have helped maintain spend through to the end of December.

“For supermarkets, the shift of spend away from the hospitality channel gave a boost to sales but limits on family gatherings changed what was bought and supermarkets focused on price cuts in seasonal and fresh food to encourage shoppers to spend on treats and indulgences, and to help make Christmas more affordable.”