Consumer spending expected to rise in UK

Consumers are expected to increase their spending in the next few weeks following new figures today showing shop prices fell for the 23rd month in a row, Press Association reported.

Deflation in the retail industry accelerated to 2.1 per cent in March from 1.7 per cent in February, the deepest rate since records began in December 2006, according to the BRC-Nielsen Shop Price Index.

The survey reported annual retail food deflation of 0.9 per cent in March from a 0.4 per cent fall in February, largely because of fresh food promotions, while non-food deflation accelerated to 2.8 per cent in March from 2.5 per cent in February.

Shop prices have fallen for 23 months in a row.

The sharp decline in food prices was driven by a combination of falling fresh food prices and slowing ambient food inflation.

Separate data from Nielsen suggests that the total volume of items bought from supermarkets grew for three consecutive months following 17 consecutive months of year-on-year declines.

On a 12-month average basis, the index reported deflation of 1.7 per cent.

BRC director general Helen Dickinson said, "Prices in Britain's shops reached another new low, this month by -2.1 per cent.

"Food prices saw a further drop, largely as a result of promotions for fresh food, whilst non-food prices fell at a faster rate than last month, hitting a 24th consecutive month of deflation."

She added, "Both retailers and consumers will cheer on a hat-trick of good economic news. The consumer price index (CPI) has fallen to zero for the first time on record, boosting incomes in real terms and bringing the UK to the brink of a spell of deflation that is expected in the coming months.

"Consumer confidence has also soared to a near 13-year high. Retailers will have been hoping that this translated into shoppers being prepared to splash their cash over the long Easter weekend.

"With strong consumer confidence and relatively benign macro-economic conditions we can expect the nation to respond with their feet or with a mouse click in the coming weeks."

Nielsen head of retailer and business insight, Mike Watkins, said, "Prices continue to fall across the retail industry and deflation is likely to be with us for the near future, which means shoppers are going to be able to stretch their budgets further when shopping in store or online."