Coronavirus: January retail prices fall amid post-Christmas sales

Saleha Riaz
·2 min read
Brexit-related red tape, rising global shipping costs and food commodity prices, as well as coronavirus-related restrictions and lockdown mean pricing pressures are stacking up for retailers. Getty Images
Brexit-related red tape, rising global shipping costs plus coronavirus-related restrictions mean pricing pressures are stacking up for retailers. Getty Images

Retail prices fell by 3.6% in January amid post-Christmas sales, as businesses try to deal with the economic fallout of the coronavirus pandemic.

This was compared to a decline of 3.2% in December, below the 12 and six-month average price declines of 3.2% and 3.3% respectively, according to data from the British Retail Consortium (BRC) and Nielsen.

The report said overall shop prices fell in January by 2.2%, below December’s decrease of 1.8%, the lowest deflation rate since May 2020.

Food inflation eased to 0.2% in January, down from to 0.4% in December. This is the lowest inflation rate for the category since January 2017, the report said.

Chart: British Retail Consortium
Chart: British Retail Consortium

Helen Dickinson, CEO at BRC noted that “January blues may have been slightly eased for many consumers thanks to ongoing falling prices this month. Post-Christmas sales and the national lockdown drove non-food prices down – especially for clothing and DIY goods.”

“Meanwhile, food prices rose at their slowest rate since January 2017 with supermarkets continuing to fiercely compete to offer hard-pressed customers the best combination of price and quality.”

She explained that Brexit-related red tape, rising global shipping costs as well as coronavirus-related restrictions and lockdowns mean “pricing pressures are stacking up for retailers.”

With consumers’ finances under increasing pressure and an intensely competitive environment, businesses will try to absorb the majority of costs.

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But she said the government must act quickly to ensure the Northern Ireland Protocol is implemented in a “pragmatic and workable way and issues on movements of goods and ecommerce are ironed out quickly to prevent inflation flowing through to customers.” The protocol is related to the movements of goods between the UK and Northern Ireland.

Meanwhile, fresh food prices fell for the second consecutive month in January with prices decreasing by 0.8%, compared to a decline of 0.9% in December.

Mike Watkins, head of retailer and business insight at Nielsen said “food retailers remain locked in a battle for market share and continue to cut prices.”

“Looking ahead, we can expect some turbulence in shop prices as the industry navigates through the impact of the EU trade deal, the increasing pressure on disposable incomes, and the uncertainty of when non essential retail can fully reopen,” he added.

Meanwhile official data published last week showed sales, excluding fuel, grew by just 0.4% in December. Economists had forecast month-on-month growth of 0.8%.

“The recovery in retail sales fell flat in December,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

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