Retailers ‘ease pressure on hard-up consumers’ by slashing store prices

HEAVY discounting and supermarket price wars have helped push the price of goods in the shops to their lowest levels in a year as retailers shoulder high energy and distribution costs, research today shows.

The British Retail Consortium claims its members are helping to reduce the burden on hard-up households as they slash prices to get shoppers through their doors.

Shop price inflation hit 2 per cent last month from 2.1 per cent in October and the BRC expects it to continue its downward trend in December as retailers ramp up promotional activity in the last few weeks before Christmas. Advisory firm Deloitte has suggested that discounting this Christmas could reach the same levels seen prior to the recession in 2008-9 as the high street faces some of the harshest trading conditions for three years.

Although commodity prices are starting to ease, the BRC says shops have chosen to protect families from rising input costs in order to keep up footfall.

Food inflation was the main driver behind November’s decrease as supermarket price wars, led by Tesco’s £500 million Big Price Drop campaign, saw it fall for the second consecutive month to reach 4 per cent. This was down on 4.2 per cent in October and research shows that British households now pay 5 per cent less for a typical basket of goods compared to the European average.

Meanwhile non-food inflation remained steady at 0.8 per cent although certain categories, including electricals, clothing and footwear, remain deep in deflationary territory.

Despite the dip in shop price inflation, economists expect families to remain under pressure as wage growth fails to keep pace with the cost of living. Average earnings increased 2.3 per cent in the three months to September and growth is expected to remain “lacklustre” next year.

Inflation as measured on the consumer prices index (CPI) is coming down – 5 per cent in October, down from 5. 2 per cent in September – but any improvement in real incomes is not expected until 2013 when wages catch up with the cost of living.

Stephen Robertson, director general of the BRC, said of today’s shop price inflation figures: “At a time when petrol prices and utility bills are sky-high, fierce competition in the retail sector is helping hard-pressed families manage their budgets. Shop price inflation is now at its lowest for a year despite retailers having to cope with rising costs from suppliers and surging energy and distribution bills.”

“Retailers have protected consumers from the full impact of global commodity and currency shocks during 2011. In 2012 the government should do more to reduce the costs it controls, chiefly business rates and the burden of regulation.”