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Non-food deflation hits two-year high

Non-food prices have fallen by their fastest rate for two years according to the British Retail Consortium, with clothing and footwear seeing a deflation of 4.2% in December 2008 because of pre-Christmas discounting.

The British Retail Consortium said in its BRC-Nielsen Shop Price Index that deflation in clothing and footwear was at its highest level since December 2007.

Price deflation in clothing and footwear in November 2008 stood at 1.7%.

The BRC blamed high-level discounting by retailers in the run-up to Christmas and the effect of the VAT reduction.

Stephen Robertson, BRC director general, said: “Huge discounting by retailers, together with the VAT reduction, brought non-food prices down dramatically. Goods in every category were much cheaper - both compared with the previous month and a year ago.”

He added: “It’s clear retailers are holding down shop prices at a time when many of their own costs are increasing. The government shouldn’t be adding cost burdens, such as record high business rate increases, at a time when margins are being severely squeezed.”

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