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British Retail Prices Fell Again in Dec; Deflation Set to Continue in 2016

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Apparel and footwear prices in the U.K. continued to drift down in December, as unseasonably warm winter weather forced retailers to resort to discounting in order to shift unsold stock, the British Retail Consortium (BRC) said Wednesday.

According to the BRC’s shop price index, non-food products retailed for 3 percent less last month than in the year-ago period—marking the 33rd month of non-food price drops, albeit a smaller decline than the 3.3% decrease reported in November.

Within that category, however, clothing and shoe prices slipped 6.4% in December compared with a 6.3% drop in the previous month.

It was a downward trajectory seen across the board in Britain, as overall shop prices were down 2 percent last month and 1.7% on a 12-month average basis.

“Prices in Britain’s shops have continued to tumble,” Helen Dickinson, chief executive at BRC, stated. “For the last two years and eight months, customers have been able to fill their baskets, whether virtual or physical, and pay less for their goods than the year before.”

She continued, “With retailers continuing to invest in price, relatively low commodity prices and intense competition a hallmark of the industry, we can expect falling prices to continue in the medium term.”

Earlier this week, British fashion retailer Next reported that sales in the run up to Christmas were “disappointing,” citing “unusually warm weather in November and December,” as well as poor stock availability from October onwards. Full-price sales at Next retail stores were down 0.5% during the Oct. 26-Dec. 24 selling period, while its catalog and online business grew 2 percent increase.

Mike Watkins, head of retailer and business insight at Nielsen, noted that the current levels of deflation across the retail industry look set to continue for the first half of 2016. “There is little upward inflationary momentum from global commodity or oil prices and locally, the price war in food retailing looks set to continue,” he said, adding, “After the unseasonably mild autumn and early winter, many non-food retailers will use price cuts and targeted promotions early in the year, to help sell through and to benefit from any rise in real wages.”

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