Price falls 'tough for retailers but great news for shoppers'

A tough trading environment meant "great news" for consumers in January as prices in Britain's shops fell by 1.8% on the year before, new figures show.

Overall shop deflation - down from 2% in December - was the result of intense competition and retailers' ongoing investment in price, according to the BRC-Nielsen Shop Price Index.

Shoppers have now been able to fill their baskets and pay less for their goods than the year before for the last two years and nine months.

British Retail Consortium chief executive Helen Dickinson said: "Higher levels of consumer confidence are currently translating into other parts of consumer spending - in leisure, entertainment and eating out - rather than into shopping which is providing the backdrop to a tough trading environment for retailers but great news for shoppers."%VIRTUAL-ArticleSidebar-shopping-2016%

January also marked the 33rd month of falling shop prices and the 34th month of non-food price drops.

Non-food prices saw an impressive 3% drop for the second consecutive month, driven largely by reductions in clothing, footwear, books, DIY, stationery and home entertainment.

Food prices increased by 0.1% compared with the 0.3% drop in December, marking the first rise since August 2015.

Ms Dickinson said: "We will have to wait for next month's figures to see whether this is a one-off blip or whether after a sustained period of price falls food prices are beginning to stabilise."

Mike Watkins, head of retailer and business insight at Nielsen, said: "Sales momentum in January has been slow for some retailers with shoppers seeking out the best prices online and in store, and this competition is helping keep non-food shop prices lower than a year ago.

"Many seasonal lines have also come off promotion which will have moved food prices upwards a little, but there is still no general upward pressure on prices, despite recent currency appreciations.

"Looking ahead, we expect overall shop price deflation to remain broadly unchanged for next few months."