January Sales push shop price deflation to deepest level since 2006

The British Retail Consortium (BRC) Nielsen Shop Price Index recorded the ninth consecutive fall across shop prices in January, after deflation accelerated to 1% in the month from 0.8% in December.

Food inflation eased to 1.5% from 1.7% in December, as the grocers discounted in the fight for market share, keeping it at its lowest level since March 2010. But the index suggests this will have come at the expense of retailers’ profit margins.

Non-food prices deflated 2.7% in January from 2.3% in December, as fashion, furniture and electricals retailers, in particular, launched big Sales combined with shoppers taking stock of their personal finances after the Christmas splurge.

BRC director-general Helen Dickinson said: “Shop prices are falling at their fastest rate for seven years, a new record for our data. 

“January is always a key month for Sales and promotions but discounts have been deeper and more widespread than last year and we are seeing this trend continuing.”

Within food fresh food, inflation sped up slightly in January to 1.6% from 1.5% in December but this was offset by slowing inflation in ambient food, which dropped to 1.3% in January from 2% in December.

Inflationary pressure eased in milk, cheese and eggs, convenience foods and vegetable categories while non-alcoholic beverages and bread and cereals pushed ambient inflation to an eight-month low.

Non-food deflation has been deeper than 2% for seven consecutive months as clothing and footwear, electricals and furniture and floorcoverings, books, stationery and home entertainment all reported deflation.

Nielsen head of retailer and business insight Mike Watkins said: “The start of 2014 has seen a continuation of both slow retail growth particularly in food, and a continuation of slowing inflation.

“With the first few weeks of January a time when many households take stock of personal finances, the fall in shop price inflation will be a welcome boost for consumers.”