Overall shop prices reported deflation for the 14th consecutive month in May, accelerating to 1.8% in June, according to the latest BRC-Nielsen Shop Price Index.
This is the deepest level of deflation since these measurements began in December 2006 – non-food reported an acceleration in deflation of 3.4% in June from 2.8% in May, again, the lowest ever recorded.
Deflation in the Furniture and Floorcoverings category accelerated to 1.5% from 0.8% in May, below the 12-month averages of 1.8%, but above the three month average of 1.4%.
The house textiles and the furniture, furnishing and carpet category experienced an acceleration in deflation. Overall, the housing market has continued to show signs of improvement, with house prices continuing to grow – however, mortgage approvals are dipping. There is now tentative signs that activity in the housing market may start to moderate.
The number of loan approvals for house purchase was 61,707 in May, compared to the average of 67,207 during the first five months of the year. Gross mortgage lending was £16.5b in May, marginally down on April’s figures but up 12% compared to May 2013. In the year to June, prices rose by 11.8% – the third month of double-digit growth this year and the fastest rate since January 2005. Once again, the figures hide a sharp contrast between London and the rest of the UK, with prices in the capital now about 26% higher than they were this time last year. Demand continues to be supported by record-low interest rates, improved credit availability and rising consumer confidence.
"We see that consumer confidence is at its highest level since April 2005"
Helen Dickinson, British Retail Consortium (BRC) director general, comments: “June saw plenty of good news for cash-conscious customers, and confirms that retailers have continued to work hard to help budgets go that bit further over the summer.
"This is the deepest level of deflation in non-food and the lowest rate of inflation for food since 2006 when our records began. Added to this, we see that consumer confidence is at its highest level since April 2005. Fierce competition among grocers has driven food price inflation to record low levels and with some grocers having announced plans to keep prices down, consumers stand to benefit for a while to come.
"The backdrop was equally promising, with stable commodity markets and the continued strength of sterling suggesting inflation is set to remain low in the medium term. Although of course, a strong pound is not so good for those retailers exporting – one exciting and growing area in British retail.
"However, it is clear that retailers are making sure these positive economic benefits in the home market are being passed on to consumers while they themselves will cheer on the very low Producer Price Index – an indication of the cost pressures they face.
"While the economic recovery continues to gather pace it was not all good news as household disposable incomes remain under pressure. Interestingly, while wage rises remain lacklustre throughout the economy, the squeeze on disposable incomes is not coming from retail but other areas if the economy such as leisure and recreational activities.
"The backdrop was equally promising, with stable commodity markets and the continued strength of sterling suggesting inflation is set to remain low in the medium term. Although of course, a strong pound is not so good for those retailers exporting"
"With shop price inflation at a record low this is undoubtedly an excellent time to go out and find a bargain.”
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."
On a month-on-month basis, prices fell by 0.6%, from a 0.3% fall in May.
