Retailer promotions keep food prices falling

Food price deflation is predicted to continue
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A focus on promotion by retailers has led to another month of food price deflation.

Although food price deflation continued in June, 0.4% marks the lowest deflation rate since February, the BRC-Nielsen Shop Price Index reported.

Meat and fish continued to keep fresh food prices down. They were the only sub-categories in fresh food to report deflation which slowed to 1.2% in June for the category. On a month-by-month basis, they rose 0.6% in June.

Helen Dickinson, British Retail Consortium (BRC) director, said: “Food has been deflationary throughout 2015, but the pace slowed in June, largely as a result of the rebound of oil prices in recent months.”

Overall shop prices reported annual deflation of 1.3% in June compared to 1.9% in May.

She added that conditions had improved for consumers. “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.”

Continuing trend

Nielsen predicted that food prices would continue to drop as retailers continued to rely on promotions.

“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,” said Mike Watkins, head of retailer and business insight at Nielsen.

“With many food retailers still using price cuts to attract new shoppers, this is lowering the cost of the weekly shop and, thus, 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.”

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