This
activity is due to retailers dropping prices to promote business.
According to the data from the ONS, average store prices saw a
decline of 1.5% during this October, compared to the same period last
year. Prices, excluding food, saw an annual rate decline of 1.2%
during October, compared to 0.9% during September. Annual price
declines were experienced in all spending categories, including
petrol stations, clothing, household goods, internet sales, footwear,
department stores and supermarket. This is the first time this has
occurred in more than 10 years.
The
explanation for this phenomenon is easy. Retailers encountered a
tough September when they tried to increase prices after the summer
sales. The easiest method of moving stock is to drop the prices and
that is exactly what they did. Sales volumes declined by 0.3% during
September, but increased during October.
This
trend is set to continue. Consumers are still feeling the pinch on
real incomes and those with spare cash know that if they refrain from
buying, retailers will start to panic and prices will drop. Retail
profit margins are dropping and this will become evident in their
trading results in the next few months.
The
battle of the high street has begun and only one party will be
victorious.
