Shop prices rose year-on-year at their highest rate since 2013 in December, despite a period of heavy discounting from retailers during peak Christmas trading, according to new data.
The BRC-Nielsen Shop Price Index showed that throughout December, shop price inflation accelerated to 0.3%, up from 0.1% in November, while food inflation decelerated to 1.5% from 1.6% in November.
The data revealed that month-on-month, non-food deflation decelerated to 0.4% from 0.8% in November - the lowest rate of deflation since March 2013 - while fresh food inflation slowed to 0.9%, down from 1.2% in November. But ambient food inflation accelerated to 2.3% in December from 2.1% in November.
BRC chief executive, Helen Dickinson OBE, said: “December’s Shop Price figures only serve to underline how tough conditions are in the retail industry. Despite non-food goods being cheaper on average than last year, early indications suggest that retailers faced a challenging environment throughout the festive season.
“Shoppers may have become accustomed to great value, but Brexit uncertainty means that a continuation of the low prices is by no means guaranteed. Without a trade deal with the EU, the cost of importing many of the goods we buy day to day will go up significantly and retailers simply do not have the room in their margins to protect consumers from those costs.
“Unless Parliament comes together behind a deal that ensures frictionless, tariff-free trade we could see prices paid by UK households rise substantially.”
According to Nielsen, the easing of fresh food inflation is likely to be the first indication of the downward pressures for the category from lower international food prices.
Nielsen head of retailer and business insight, Mike Watkins, said: “With an uncertain economic outlook, retailers had to work hard to encourage customers to keep shopping, and in the run up to Christmas price discounting was deeper and began earlier across both food and non-food channels.
“There was also unprecedented levels of vouchering in December across many supermarkets to encourage shoppers to spend, and this competitive retail environment kept increases in shop prices low. Retailers know that customers are worried about their personal finances, so they will continue to do all they can to limit price rises over the next few months despite the external pressures.”