Clothing and footwear shop price deflation slowed to 1.4% in January from 3.3% in December, the lowest level of deflation reported since October 2008.
According to the BRC-Nielsen Shop Price Index, while discounting is still visible in some sections of clothing and footwear market, deflation is expected to slow further as prices increase as a result of the VAT reversal.
Overall shop price inflation was slower than expected in January, rising 2.3% as many retailers held off passing on the VAT rise that came into effect at the start of the year.
BRC director general Stephen Robertson said: “January’s VAT increase was lost among a huge number of discounts and promotions. We would have expected non-food inflation to be higher because of the VAT rate reversal, but many shops held off passing the extra costs onto their customers,” he said.
“Fierce competition, in the face of weakening consumer demand and uncertainty about the recovery, is keeping shop prices down,” Robertson added.