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Retailers on alert

Shop price pressure expected to build

Prince St retail shoppingPrices fell in June at the slowest annual pace since November 2013, the British Retail Consortium (BRC) said today, though it expects rising inflation to push prices higher.

Overall shop prices declined 0.3%year-on-year last month, compared with a 0.4% drop in May. Food prices rose 1.4%.

Helen Dickinson, chief executive, British Retail Consortium said:  “Shop prices in June edged closer to ending a four-year deflationary trend, as feed-through from the depreciation of the pound and rising commodity prices continues.

“The fact that the headline number shows that prices are still down on last year should not be misunderstood. The year on year numbers belie the fact that prices have been heading upwards for the last six months; it’s just that significant deflation in the second half of 2016 means there has been considerable ground to make up in the year on year figures.

“The reality is that cost pressures faced by retailers continue to mount. These pressures arise both from market driven increases in the underlying cost of goods and as a result of Government policies.

“There is a limit to the ability of retailers to protect consumers by absorbing these impacts into their margins, as a result further price increases are inevitable. With that in mind and with the UK’s trading relationships under discussion, it’s of the utmost importance that the Government does all it can to limit any further cost increases that could further adversely impact the finances of the UK’s consumers.”

Mike Watkins, head of retailer and Business Insight at Nielsen, said:With inflation rising in essential goods and services, many households are now seeing their monthly household expenditure come under pressure. 

“Whilst this may add to the uncertainty around discretionary spending, the good news is that shop prices are increasing at a slower rate. Shoppers are also able to find further savings in retail with low price strategies across the grocery sector and competition across the marketplace keeping prices as low as possible.”

David Lonsdale, director of the Scottish Retail Consortium, said “Scottish consumers continue to benefit from falling shop prices, however this is the shallowest rate of decline in over three and a half years.

“It is a clear indication of the direction of travel, suggesting that the sustained period of falling shop prices witnessed over recent years is coming to an end.

“Retailers are battling to keep prices down, but with global food commodity prices up, the exchange rate down, and public policy costs mushrooming, retailers in some categories are now regrettably being forced to pass some of this onto customers.

“Consumer demand has often proven a reliable source of economic growth but this will be tested in the period ahead, as Scots find themselves buffeted by rising overall inflation, higher council tax, and with statutory rises in employee pension contributions in the pipeline.

“The UK government can help retailers keep down shop prices by securing a lasting tariff-free trade deal with the EU.

“The Scottish government can assist by keeping down the cost of living and resisting calls for higher income taxes. With half of VAT receipts set to be assigned to Holyrood our MSPs have a direct stake in improving consumer sentiment and a flourishing retail industry.”

 

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