Britain’s Retailers Continue to Grapple with Price Deflation

A deflationary psychology is at work among British consumers and this leaves Britain’s retailers with little pricing power.

Here’s an excerpt from a Nov. 1 AOL UK article titled, “Shop price deflation remains at four-year low”:

Shop price deflation remains at a four-year low as a squeeze on discretionary spending power slows retailers from passing on rising costs, a survey suggests.

Prices fell just 0.1% in October, the same rate as in September and their shallowest level of deflation in the last four years, according to the BRC-Nielsen Shop Price Index.

Deflation on non-food items remained at 1.5%, and food prices recorded the same increase as in September of 2.2%.

Fresh food inflation accelerated to 2.2% from 1.8% in September, countered by ambient food inflation which eased to 2.2% from 2.7% in September.

British Retail Consortium chief executive Helen Dickinson said: “On the one hand global food prices continue to head upwards at the same time as the weaker pound has left retailers facing significantly higher bills for imported goods.

“On the other hand, the tightening squeeze on discretionary spending power is reducing the ability of retailers to pass on increased import costs.

You can read the entire article by following the link below:

EWI’s European Financial Forecast is not surprised by Britain’s four-year low in shop price deflation. In October, the publication showed this chart and said:

The chart from Visa shows that UK consumer spending recently underwent its longest period of contraction since 2013, as “stagnant wages and rising prices have bitten into household budgets.” Especially weak were household discretionary purchases such as clothing and housewares, exacerbating the “fragility of the economic outlook.” (FT, 8/7/17) According to the Financial Times, “Britain has failed to regain economic momentum after a slowdown in growth at the start of the year.”

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