Price and VAT cuts slash shop inflation

Published on Wednesday 7 January 2009 20:32

SHOP price inflation in Scotland last month was at its lowest level for a year as the cut in VAT and heavy discounting kicked in, according to figures published yesterday.

Data from the Scottish Retail Consortium (SRC) revealed that year-on-year shop price inflation fell from 3.8 per cent in November to 1.5 per cent in December, the fourth consecutive monthly fall.

On a month-by-month basis, prices in Scottish shops fell by 2.1 per cent, in line with the 2 per cent reported fall throughout the UK as a whole.

Fiona Moriarty, SRC director, said: "At 1.5 per cent, Scottish shop prices rose more slowly in December than they have for a year, while the drop in the rate of Scottish shop price inflation from 3.8 per cent in November was the biggest fall recorded since this index began in December 1995.

"Non-food goods such as electricals, clothing and footwear are actually cheaper than they were a year ago, showing how retailers' huge discounts and VAT cuts are containing prices."

Throughout the UK, the 2 per cent fall in retailers' prices was the largest drop since the British Retail Consortium (BRC) began collecting data in its present format in 2005.

Non-food prices were slashed heavily, falling by 2.7 per cent month-on-month and by 2.4 per cent compared with December 2007.

Electricals, books and home entertainment were all about 5 per cent lower than a year earlier as retailers began discounting before Christmas in an effort to lure in consumers, the BRC said.

Mike Watkins, a senior manager at analysts Nielsen, which compiled the figures, said: "Shop prices fell again in December due to the VAT reduction, but also due to continued price cuts and deep promotions in many stores as retailers looked to attract shoppers and encourage spending over the Christmas and New Year period".