'Price deflation' slows on high street
Wednesday, 05 Jul 2006 11:46
'Price deflation' slows on high street
Prices on the high street dropped by 0.2 per cent in June despite inflation in food prices, the latest British Retail Consortium (BRC) shop price index has shown.
The latest BRC figures show a slowdown in the continuing trend of falling prices.
While the food price rise of 0.67 per cent slowed from the 1.4 per cent rate in May, overall adjusted shop prices rose by just 0.001 per cent, significantly less than the 0.42 per cent recorded last month.
"Price deflation is continuing apace and as retailers vie for sales, competition within the sector is increasing," commented Kevin Hawkins, director general of the BRC.
"While this is good news for the consumer, the continued discounting and promotional activity is coming at a cost to retailers’ margins and any growth in the market is being driven by lower prices."
An improvement in grocery sales and their clearly superior performance to non-food products has been attributed to the World Cup by Mike Watkins, senior manager of retail services at market information provider AC Nielsen.
"Warm weather and football fever has kept food retailing buoyant with top-line market growths of eight per cent at the grocery multiples over the last few weeks," he said.
"However, for many non-food retailers it’s been more difficult to generate footfall and we see little evidence to suggest that prices will rise in the near future."
Prices in the index have now been falling for 11 of the last 13 months, according to the BRC shop price index, reflecting the long-term nature of gloomy market conditions in the struggling retail sector.
Opinion is divided as to the significance of today's findings from the BRC. While some observers suggest that the slowing trend of price falls could indicate that their cyclical decline is about to come to an end, others believe that retailers, having played the price-cutting card to stimulate sales for such a long time, are simply unable to afford price cuts in the future.