The furniture and floorcoverings sector saw annual deflation of 1.4% in March, up from -1.6% in February, reports the BRC-Nielsen Shop Price Index for March 2015. Upward pressure came from the house textiles category, which reported a deceleration in its deflation rate, while furniture, furnishings and carpets remained at similar levels to February.
Mortgage approvals as measured by the Bank of England edged up in February to 61,760 – a six-month high. The Nationwide reported that house prices increased by 5.1% in March. BRC-Nielsen states that a number of economists now feel that the market is showing signs of improvements after weakening in recent months.
Overall, shop prices reported deflation for the 23rd consecutive month, accelerating to 2.1% in March from 1.7% in February.
BRC director general, Helen Dickinson, comments: “Prices in Britain’s shops reached another new low, this month by -2.1%. That’s the deepest deflation rate since our records began in December 2006. Food prices saw a further drop, largely as a result of promotions for fresh food, whilst non-food prices fell at a faster rate than last month, hitting a 24th consecutive month of deflation.
“Both retailers and consumers will cheer on a hat-trick of good economic news. The onsumer price index (CPI) has fallen to zero for the first time on record, boosting incomes in real terms and bringing the UK to the brink of a spell of deflation that is expected in the coming months. That fall is largely the result of a deep oil price slump (down 49% on a year ago) and the continuing fierce competition among supermarkets who’ve dropped fuel and food prices over the year.
“Consumer confidence has also soared to a near 13-year high. Retailers will have been hoping that this translated into shoppers being prepared to splash their cash over the long Easter weekend. With strong consumer confidence and relatively benign macro-economic conditions we can expect the nation to respond with their feet or with a mouse click in the coming weeks.”
Mike Watkins, head of retailer and business insight, Nielsen, adds: “Prices continue to fall across the retail industry and deflation is likely to be with us for the near future, which means shoppers are going to be able to stretch their budgets further when shopping in store or online.
“The implication for food retailers is that this may help sustain the slowly improving sales volumes we have seen in recent weeks, and also encourage consumers to spend some of their savings on affordable indulgences. For many high street fashion, home and outdoor retailers, lower prices are being backed up by attractive promotions which comes at good time as momentum builds in selling late spring and early summer ranges.”
