Shops slashed prices at the steepest rate since 2006 in May, according to a closely watched industry price tracker.
The British Retail Consortium (BRC) and consumer research firm Nielsen said prices fell by 2.4% in May, an acceleration on the 1.7% fall seen in April. May’s discounting was the steepest monthly fall in prices recorded in 14 years.
The slump was driven by collapsing prices for non-food items, which fell 4.6% in May.
“Clothing and Furniture saw the biggest drop as retailers ran promotions to encourage consumer spending and attempted to mitigate recent losses,” said Helen Dickinson OBE, chief executive of the BRC.
Price drops came as consumers reigning in spending at record levels. Bank of England figures show Brits saved £16.2bn ($20.3bn) in April, more than triple the usual monthly amount, and paid off a record £7.4bn of debt.
Prices are forecast to continue to fall in the coming months as retailers shift a backlog of stock built up during the lockdown.
Clive Black and Darren Shirley, retail analysts at stockbroker Shore Capital, said they expected to see “chunky sales” across the High Street this summer.
“The reality is that billions of pounds of goods have made their way to these shores and whilst the inflow tap has been somewhat turned down, such goods need to find a home,” they wrote in a note to clients.
Dickinson said: “Even as non-essential shops begin to reopen from 15 June, consumer demand is expected to remain weak and many retailers will have to fight to survive, especially with the added costs of social distancing measures.
“Retailers face an uphill battle to continue to provide their customers with high quality and great value products despite mounting costs.
“Government support remains essential, both to rebuild consumer confidence and to support the thousands of firms and millions of jobs that rely on it.”
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While non-food retailers struggle, supermarkets and other food businesses have seen strong sales and been able to raise prices during the lockdown. The BRC-Nielsen tracker found food prices rose by 1.5% in May.
“Year-on-year food prices increased slightly due to higher business costs, implementing social distancing measures and the upward pressure from labour shortages, but were down on the previous month as more home-grown produce became available,” Dickinson said.
“We expect to see continued upward pressure on food prices from the effects of the pandemic in the coming months.”