Retailers continue to absorb VAT rise
Increase is lost among discounts and stock clearances.
The BRC-Nielsen Shop Price Index January 2011 shows that overall shop price inflation increased to 2.5% in January from 2.1% in December. Food inflation accelerated to 4.6% from 4.0% in December. Non-food inflation increased to 1.3% from 1.1% in December.
Stephen Robertson, British Retail Consortium Director General, said,”The VAT rise had little effect on shop prices in January. Poor Christmas trading left retailers with stock to shift. The impact of the increase was almost entirely lost among the unusually high number of post-Christmas discounts and promotions.
“The rate of inflation for non-food goods – mainly the ones subject to VAT – was only 0.2 percentage points higher after the VAT rise than before, showing retailers generally took the hit on behalf of customers.
“But, with a range of other cost pressures also squeezing margins, retailers will struggle to go on absorbing it.
“Rising commodity prices continue to push up food inflation, now to its highest for a year and a half. Even so, shop prices are still rising more slowly than other wider measures of inflation that include petrol, utilities and services.”
Mike Watkins, Senior Manager, Retailer Services, Nielsen comments,”Inflationary pressures continue, in particular in food which is why the promotional discounts given by food retailers still remain at an all time high. With over two-thirds of shoppers looking to make further savings on household bills to compensate for rising utility bills, travel costs and now the rise in VAT, and faced with a squeeze on disposable income this year, we can expect shoppers to manage their household budgets tightly during 2011.”
