Clothing and footwear prices increase despite decline in shop prices

London - Clothing and footwear prices increased month-on-month for the first time in close to two years despite of an overall drop in shop prices across the UK, according to the British Retail Consortium (BRC).

Shop prices dropped 1.4 percent last month compared to December 2015, the smallest decline since August 2015, in comparison to the 1.7 percent drop in November according to the BRC-Nielsen Shop Price Index. Overall, deflation for non-food prices decelerated to 1.9 percent in December, down from 2.3 percent in November, the weakest delation rate since June 2015.

The BRC notes that the data indicates retailers have yet to pass on the higher costs of imported goods caused by the drop in the pound after the Brexit vote in June and warns it may slowly start to happen throughout 2017.

“We’ve said for some time that we expect to see underlying inflationary pressures, notably from the post-referendum fall in the value of the pound, feed through into shop prices,” commented Helen Dickinson OBE, Chief Executive at the BRC. “It’s too early to confirm that this is what we’re seeing in December’s figures: timings of seasonal discounts can cause monthly fluctuations at this time of year and retailers have continued to find ways to mitigate the impact on consumers.”

“However, we expect the general trend in inflation to be upwards over 2017. The magnitude of the exchange rate movement and commodity price rises combined with the increasing costs of doing business means that retailers will have little choice other than to pass on some of these rising costs into prices but effect will be lessened by the intensity of competition.”

Mike Watkins, Head of Retail and Business Insight at Nielsen added that consumers should expect the return of shop price inflation over the next six months. “But as the battle for the wallet of the shopper is so intense, this will be phased in by retailers and any increases are likely to be less than other sectors of consumer spend as measured by the consumer price index.”

Photo credit: Oxford Street, Facebook; Sources: Retailthinktank.co.uk, theretailbulletin.com