In May, deflation in the Furniture and Floorcoverings category decelerated to 0.8% from 2.1% in April, below both the three- and 12-month averages of 1.3% and 1.8% respectively, according to the latest British Retail Consortium (BRC)-Nielsen Shop Price Index (SPI).
The house textiles category experienced accelerated deflation while the furniture, furnishing and carpet entered inflationary territory. Overall, the housing market has continued to show signs of improvement, with house prices continuing to grow – however, mortgage approvals dipped. The number of loan approvals for house purchase was 67,135 in March, compared to the average of 70,363 over the previous six months. Gross mortgage lending was £16.6b in April, 8% higher than the £15.3b in March 2014 and up 34% compared to April 2013.
In the year to April, prices rose by 10.9%, the first annual double-digit growth since April 2010 and the fastest rate since June 2007. Once again, the figures hide a sharp contrast between London and the rest of the UK, with prices in the capital now about 20% higher than they were before the financial crisis of 2007-08, says the report. Demand continues to be supported by record low interest rates, improved credit availability and rising consumer confidence. The increase in the availability of credit through Government-led schemes, such as Funding for Lending and Help-to-Buy, continued to boost the housing market.
Overall shop prices reported deflation for the 13th consecutive month in May, remaining unchanged at 1.4% from April.
Helen Dickinson, BRC director general, says: “May has seen shop price deflation remain unchanged at 1.4%, the 13th consecutive month of deflation. We’ve also passed the 14th consecutive month of non-food deflation, mainly as the result of good bargains in categories popular with consumers in summer months such as clothing and footwear. Value was also a mainstay across the gardening and DIY categories, as retailers competed to cater for strong demand over the May Bank Holiday."
Mike Watkins, head of retailer and business insight, Nielsen, adds: “Food inflation is still low, many supermarkets are price cutting and non-food prices remain deflationary, so the high street continues to generate little inflationary pressure. Little in the way of immediate seasonal or weather-related price increases is anticipated, so the outlook for the next three months is for relatively stable shop price inflation. Helped by the increases in consumer confidence since the start of the year, this should encourage shoppers to spend more freely over the summer months."
According to the index, the cost of living has eased for families in the UK, as the average household had £170 a week of discretionary income in April 2014, up £3 a week year-on-year. According to Asda's Income Tracker, family spending power continued to rise for the seventh month in a row. While families saw yet another boost to their incomes, the rate of growth slowed compared to the £7 increase seen in March. The Office for Budget Responsibility (OBR) has forecast that real incomes will not return to 2008 levels until 2018 at the earliest. While real household spending is continuing to pick up, retailers have remained under pressure to offer generous discounts.
