June 3, 2014 / 11:04 PM / 4 years ago

UK shop prices fall 1.4 percent on year in May - BRC

LONDON (Reuters) - Prices in British shops last month were 1.4 percent lower than a year earlier, the same rate of decline as in April, continuing their deflationary trend, the British Retail Consortium said on Wednesday.

The BRC said annual food price inflation held steady at April’s record low of 0.7 percent, while the prices of other goods fell by 2.8 percent on the year in May, gathering speed from April’s 2.7 percent decline.

“The high street continues to generate little inflationary pressure,” said Mike Watkins, head of retailer and business insight at Nielsen, which conducted the survey for the BRC.

May’s 1.4 percent drop in prices is only slightly less than the 1.7 percent fall recorded in March, which was the biggest drop since the BRC started collecting data in 2006.

The BRC cited bargains in clothing and footwear and ‘value as a mainstay’ in gardening and DIY to explain the price falls.

The BRC figures show a much lower rate of inflation than the broader consumer price inflation measure targeted by the Bank of England, which include faster-rising costs such as utility bills, entertainment, healthcare and university tuition.

Consumer price inflation rose to 1.8 percent in April, just below the BoE’s 2 percent target.

Nielsen’s Watkins said he expected competitive prices to boost consumer demand over the coming months.

“The outlook for the next three months is for relatively stable shop price inflation. Helped by the increases in consumer confidence since the start of the year, this should encourage shoppers to spend more freely over the summer months,” he added.

Reporting by David Milliken; Editing by Catherine Evans

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