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Clothing prices fall despite VAT increase

Clothing is cheaper than it was this time last year in spite of January’s VAT increase, according to the BRC-Nielsen Shop Price Index.

Clothing and footwear recorded deflation of 0.8% in February against the same period 12 months earlier. However prices of fashion and footwear were 0.8% higher than in January. The BRC said that this was the lowest level of deflation for the category since the Index began in 2006.

However, the BRC said that although clothing and footwear were still in deflationary territory, this was to a lesser extent than three months ago, due to the reversal of the VAT cut. It said much of the VAT increase had been swallowed by discounting in January and that the market could see more inflationary pressures from that increase coming through later in the year.

A 90% increase in the price of cotton is also likely to impact prices of clothing this year.

The value of sterling continues to affect prices of imports and rising oil prices look set to have an effect on non-food prices through 2010.

British Retail Consortium director general Stephen Robertson said: “The VAT increase is putting pressure on overall shop price inflation, but even so, electricals, home entertainment and clothing are actually cheaper than they were this time last year. Fierce retail competition is protecting customers and keeping inflation down.”


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