Talking of inflation – or reason to think it is on the fall, pity the retailer.
The latest survey from the British Retail Consortium (BRC) was out yesterday, and it was bad. The BRC has sales down by 0.9 per cent in July from a year ago. It wasn’t the biggest rise it has reported lately, it had sales down by 1.6 per cent in March, but it does suggest that rather quirky leap in sales reported in the spring is buried now. You may recall, a couple of months ago the ONS reported the biggest rise in retail sales seen since the 1980s, and while the BRC did not record a rise in sales of that scale, it did say sales were up 1.9 per cent in May.
But while sales fall, retailers find their costs are rising too. In the year to July, the BRC had its shop price index up by 3.2 per cent. But some goods, such as electricals and clothing, are cheaper now than a year ago.
Perhaps the most telling comment comes from Mike Watkins, Senior Manager, Retailer Services, Nielsen, who said: “Latest research from Nielsen indicates that 55 per cent of people are now cutting down on their grocery spend as their other bills increase. So, while food inflation increased again in July, savings will need to be made by shopping differently to help pay for the other increases in household spend such as energy and fuel.”
And on a similar theme, Stephen Robertson, Director General, British Retail Consortium, said: “Frivolous shopping is off the agenda as most customers concentrate on value and durability and there are few signs the slowdown has yet bottomed out.”
He added: “This is a good time for consumers to take advantage of the wide range of discounts and promotions available to them.”
And in a way, that final comment is the point. Price is not determined by cost, it is determined by what customers can afford. If companies can not supply goods at a price customers can afford, they go bust.
That is the reality of the modern economy, and that is why inflation can turn to deflation.
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