This year's high street Christmas price war could be even more savage than the discounting frenzy of 2008, an industry body said today.
Memories of shopping streets swathed in red sale banners could be relived as stores try to entice reluctant consumers to spend, according to the British Retail Consortium (BRC).
The retail body said overall shop price inflation had an annual rate of 0.2% in November, almost unchanged on last year, as inflation in food prices was weighed by deflation in the non-food categories.
Discounts are particularly prevalent among clothing and footwear retailers, who are already responsible for the biggest downward pressure on overall non-food deflation as they ramp up their promotions in the run-up to Christmas. Electrical products were also expected to be in line for further price cuts as stores look to tempt consumers to buy before the rate of VAT returns to 17.5% in January.
BRC director general Stephen Robertson said: “In the run-up to Christmas, it's clear fierce retail competition is keeping shop prices down as stores fight it out with more discounts and promotions than last year.”
He said the prices of clothing, footwear and electrical goods have been falling for a whole year.
Mike Watkins, of the Nielsen research group, said: “Shop price inflation is now stable but shoppers continue to be cautious.
“As a result we are seeing more price cuts, deeper promotions and increased benefits from loyalty schemes.”
Annual food inflation increased to 2.8% in November, from 2.5% in October, driven by accelerating prices in fresh food, amid rising commodity prices.
Increases for fruit and fresh meats drove the rise in fresh food annual inflation, which jumped sharply from 1.3% in October to 2.6% last month.Non-food deflation slowed for the second consecutive month, to 1.2%.The report predicts overall shop price inflation could rise in the near term because of the effect of the VAT reversal, although it said this upward pressure could be “muted” by discounts throughout the Christmas period.
Clothing and footwear stores may have to raise prices next year after a jump in cotton prices.