Shop prices fell yet optimism increased in June, accoridng to the latest Shop Price Index from BRC-Nielsen.
Overall, shop prices reported deflation of 1.3% in June – up from 1.9% in May. Non-food deflation slowed to 1.9%, from 2.5% in May.
Deflation in the Furniture and Floorcoverings category decelerated to 1.6% in June, from 1.9% in May. According to the index, the majority of the downward pressure came from the Household Textiles category, which reported a sharp deceleration in its deflation rate. The Furniture, Furnishings and Carpets category remained in deflationary territory.
Data on the housing market was surprisingly weak in June, with both house prices and mortgage approvals falling below expectations. The Nationwide House Price fell by 0.2%, while mortgage approvals edged down to 64,434 from 67,580 the previous month. Prices rose 0.5% on a month-on-month basis after a 0.8% fall in May.
BRC director general, Helen Dickinson, says: “Shop prices fell by -1.3% this month marking the 26th consecutive month of prices drops. This is a slight slowdown in falling prices when compared with recent months. Consumer confidence hit a 15-year high which suggests that shoppers will feel more comfortable about buying major purchases. It also suggests that consumer spending, one of the main drivers of the recovery, should remain robust over the summer.
“While non-food prices fell at a slower rate this month (-1.9% against -2.5% in May), June marked the 27th month of non-food deflation. Shoppers wishing to invest in their home won’t be disappointed, with great deals to be found in furniture and flooring and gardening and hardware in particular.
“We’re seeing a strong appetite for consumer credit, inflation remains at an historic low, unemployment continues to fall and wages have started to rise, the wider macro-economic data continues to be supportive for the consumer."
Mike Watkins, head of retailer and business insight, Nielsen, says: “Retailers continue to use price cuts and promotions to stimulate sales which is helping to maintain shop price deflation, and we see little evidence to suggest that prices will rise in the near future. With many food retailers still using price cuts to attract new shoppers, this is lowering the cost of the weekly shop and so the overall CPI figure in the UK. Deflation and price-led competition will continue to be a key driver of sales growth for some time yet."
