Commercial Property Price Wars Helped Keep Shop Price Inflation Low

Posted on 9 December, 2011 by MOVEHUT

The British Retail Consortium (BRC) has reported that the shop price inflation rate in the UK is at its lowest in over year. Both the shop price inflation and food inflation fell in November of this year, but only very slightly.

The shop price inflation was 2.1 per cent in October, but fell to 2.0 per cent in November, while the food inflation decreasing by 0.2 per cent from 4.2 per cent in the same period of time.

The BRC believes that the retail commercial property price wars have helped keep the inflation down, as Stephen Robertson, Director General at the BRC expressed: “For a second consecutive month the supermarket price war has helped reduce food inflation. As our recent research showed, a typical basket of goods purchased in the UK is around five per cent cheaper than the European average.”

However, BBC’s Panorama programme recently investigated the price wars that the ‘big four’ supermarkets undertake and revealed that, what we as consumers are seeing is witty marketing, designed to give customers the impression that they are saving money, when that is not often the case, as Richard Perks, a retail analyst stated: “If there was a price war going on at the moment we would have seen profits falling.” But instead, supermarkets are recording record profits.

“Inflationary pressures are easing. Cheaper commodities will help retailers keep prices down while the Chancellor’s decision to postpone January’s three pence increase in fuel duty will also benefit households. Retailers have protected consumers from the full impact of global commodity and currency shocks during 2011. In 2012 the Government should do more to reduce the costs it controls, chiefly business rates and the burden of regulation,” Mr Robertson added.

However, it seems that the shop price inflation and food inflation rates in commercial properties are not the only ones to fall recently. In November of this year, the Office of National Statistics reported that the Consumer Price Index (CPI) fell by 0.2 per cent in October, to 5 per cent. Although, the figure has fallen somewhat, it is still a long way off the Bank of England’s goal of 2.0 per cent. Furthermore, the Retail Price Index (RPI) also fell by 0.2 per cent in the same period, to 5.6 per cent.

So are these drops in inflation set to continue? Mike Watkins, Senior Manager at Nielsen believes so: “It’s been a slow start to Christmas trading and many retailers have reduced prices further in recent weeks to help boost footfall and spend in store. This is reflected in the headline shop price index. We also have the impact of some commodity price increases of last year now falling out of the comparatives. However, the benefits for shoppers are being offset by a continued fall in spending power as other household bills continue to rise. The outlook for inflation is however much more positive than this time last year and shop price inflation is expected to fall further in the first part of 2012.”

Although the inflation rate is falling, should we be thankful to the ‘big four’ supermarkets for engaging in price wars, even though many products are raised in price, then lowered a month later, giving the illusion of a price cut?

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