Shopper the winner as prices fall

BRC director general Helen Dickinson said: “This is an incredible run of good fortune for consumers and in the medium term at least looks set to continue.

“A number of key commodities in the retail supply chain, in particular, oil, have fallen dramatically recently and the impact of these falls will continue to make its way through to shop prices for some time to come.”

The BRC said deflation isn’t all bad news for retailers as the Producers Price Index, which tracks the cost of raw materials to producers, is deflationary which means that retailers have seen significant decreases in their own costs.

However, fierce competition, the hallmark of the UK retail industry, has resulted in these savings being passed on directly to consumers.

“It’s a win-win scenario that many are predicting will continue long into 2015,” said Ms Dickinson.

Mike Watkins, head of retailer and business insight at Nielsen, said: “The high levels of discounting across most retail channels in 2014 will have given a boost to sales and the year ended with shop price inflation close to record lows in December, so it’s the consumer who has been the winner all round.

“With little external pressure to move prices upwards and an uncertain level of consumer demand, retailers will be cautious about price increases so we can expect a continuation of deflation for at least the first part of 2015.”

The BRC-Nielsen Shop Price Index (SPI) reported annual deflation of 1.7 per cent last month, decelerating from 1.9 per cent in November.

Food saw annual inflation of 0.1 per cent after reporting deflation in November for the first time since the series began in December 2006.

Downward pressure came from milk, cheese, eggs, vegetables and convenience food, all of which reported annual deflation in December.

Price rises were seen for oils, fats, meat, fruit and fish.

Non-food deflation slowed marginally to 2.8 per cent from 2.9 per cent in November.

Prices fell in Furniture and Flooring while DIY, Gardening and Hardware and the Electrical categories also experienced deflation.

The Books, Stationery and Home Entertainment category entered inflationary territory for the first time last year in December. Health & Beauty also experienced inflation.

Deflation in the Clothing and Footwear category remained unchanged at 9.7 per cent in December. The children’s and women’s clothing categories were more deflationary than the category average.

The BRC said falls in the price of cotton is good news for retailers and consumers alike.

The research showed the price of most agricultural commodities has consistently fallen over the year, but with some exceptions.

While sugar and cotton prices were weighed down by large global supplies and record global production, coffee, cattle and cocoa prices spiked due to weather related conditions restricting supply.

Cattle prices continue to increase, driven by persistently tight supplies.

The BRC said herd numbers in the US are the lowest in decades, boosting beef prices for retailers and consumers.