Shop prices will be lower than they were three years ago this Christmas, despite growing pressures from the falling value of the pound, according to the latest BRC-Nielsen Shop Price Index.
Overall shop prices reported deflation of 1.7% in November, unchanged from the previous month, with non-food deflation accelerating to 2.3%, after falling 2.1% in the previous two months.
This could be attributed to extended promotions in the run-up to Black Friday.
But inflationary pressures are poised to emerge in the New Year, according to Mike Watkins, head of retail and business insight at Nielsen.
“Looking ahead, we can expect a slow return to shop price inflation during 2017 with fresh foods, some of which are also seasonal and weather dependent, likely to be impacted sooner when increased supply chain costs finally begin to filter through to retail prices.
“However, retailers will keep running promotions and campaigns to encourage retail spend and this will continue to help shoppers to save money next year.”
Helen Dickinson, CEO of the British Retail Consortium said these figures point to retailers’ effectiveness in controlling inflationary pressure that continues to build through the devaluation of the pound, but voiced a word of caution.
“We have still yet to see any visible impact from the weaker pound on shop prices, but we do expect to see a gradual slowing of the rate of deflation. Increasingly value-driven and informed customers mean retailers will have to remain highly competitive.
“So while we may start to see cost pressures beginning to feed through into prices next year, we don’t expect any sudden spikes or surges, and the timing and extent of increases will differ from one category and retailer to the next.”