According to the British Retail Consortium, overall shop prices reported deflation for the 17th consecutive month, accelerating to 1.8% in September from 1.6% in August. Non-food reported acceleration in deflation of 3.2% in September from 2.9% in August.
Helen Dickinson, British Retail Consortium director general, says: “The 17th consecutive month of deflation is good news for hard-pressed households. Retailers are turning their attention to Christmas by reading current conditions and matching consumer sentiment well with their promotions and offers. Non-food prices fell significantly, mainly fuelled by great bargains in furniture, flooring and electricals as increased activity in the housing market supported robust sales.
“Consumers can take heart that the outlook for inflation remains modest. Falling commodity prices, the strengthening of sterling, benign pressure in the supply chain and, critically, fierce competition across the retail industry suggests lower shop prices for consumers will continue.”
Mike Watkins, head of Retailer and Business Insight, Nielsen, says: "There are historic low levels of price increases across the high street, and with more price cuts expected over the next few weeks shoppers will continue get great savings. Whilst sales patterns are still difficult to predict not least following the unusually warm late summer, we can anticipate a continuation of the current low levels inflation and even deflation for the rest of the year. This will help shoppers to plan their spending in the run up to the start of Christmas trading."
The BRC-Nielsen Shop Price Index (SPI) reported annual deflation of 1.8% from 1.6% in August, remaining deeper than the twelve month average rate of 1.3% and in line with the three month average. Non-food deflation accelerated to 3.2% from 2.9% in August.
The Consumer Prices Index (CPI) grew by 1.5% in the year to August 2014, down from 1.6% in July.
The latest BRC-KPMG Retail Sales Monitor reported a rise in sales of 1.3% on a like-for-like basis and up 2.7% on a total basis. Furniture and flooring retailers continued to benefit from recent increases in housing transactions.
Weak inflation, further jobs growth and stronger earnings growth should ensure that the recovery in consumer spending maintains a healthy degree of momentum through the rest of this year. Brighter prospects for the UK economy have helped contribute to the strengthening of sterling which has in-turn made imports cheaper. With the backdrop of falling commodity prices, strengthening of sterling and benign pressures in the supply chain, low inflation looks set to continue in the medium term bar any supply chain shocks. Price pressures at the start of the production process are also very weak. The latest Producer Price Index figures showed that the annual rate of output price inflation eased from -0.1% in July to -0.3% in August.
Revisions to GDP estimates have left the recovery in household spending since 2009 looking a little less strong than previously thought. Nonetheless, recent spending growth remains robust. Household incomes are set to recover at a faster pace as earnings finally pick up and employment makes further strong gains, resulting in a bright outlook for continued moderate growth in spending. The average UK household had £172 a week of discretionary income in August 2014, approaching the all-time high of £174 last seen in January 2010. Household budgets were boosted this month by a slowdown in essential item inflation. The Institute for Fiscal Studies predicts that wage growth will start to outpace (CPI) inflation this year.
Non-food deflation accelerated to 3.2% from 2.9% in August. Furniture and Flooring experienced accelerated deflation.
In September, deflation in the Furniture and Floorcoverings category accelerated to 2.2% from 0.3% in August, above both the twelve and three month averages of 1.7% for both. House textiles experienced deflation above the category average while the furniture, furnishing and carpet category experienced deflation below the category average in September. Gross mortgage lending was £18.6bn in August, down 5% on July’s figures and up 13% compared to August 2013. UK house prices rose by 0.8% in August and were 11.0% higher than August 2013. The typical UK house is now worth £189,306. Once again, the figures hide a sharp contrast between London and the rest of the UK.
