Shop prices fall despite continued rise in cost of food

Overall shop prices reported annual deflation for the fifth consecutive month in September, slowing to 0.2% from the 0.5% decline reported in August. Food inflation rose to 2.9% in September from 2.5% in August. Non-food products saw an annual deflation of 2.0% in September from 2.3% in August.

The figures have been revealed in the latest BRC-Nielsen Shop Price Index for September 2013.

Helen Dickinson, British Retail Consortium Director General, said: "For the fifth month in a row our data shows that prices in the shops fell last month. Deflation in September was driven by non-food items and in fact, we've only seen one month since January 2012 which has been inflationary for non-food.

"Retailers have used deep discounts and promotions particularly in audio and visual equipment and men's and children's clothing. This is further evidence of the continuing pressure on margins across the sector.

"In food, inflation remains below trend, but was slightly higher in September than in August. Ambient food, rather than fresh, showed the more significant increases in prices. While there was a slowing of inflation in bread and cereals, this was off-set by rising inflation in non-alcoholic beverages and sugar, jam and chocolate."

Mike Watkins, Head of Retailer and Business Insight, Nielsen, said: "There are some inflationary cost pressures in the food supply chain that had an impact on the small upward movement in shop price inflation in September. However promotional savings and the use of coupons continue and this is helping shoppers to budget and seek out the best deals.

"With consumers still uncertain about when and where to spend, we expect competition for discretionary spend to intensify in both food and non-food retailing, as we head towards the end of the year."