Retailers across the country slashed their clothes prices for the 14th consecutive month in June this year. Consumers appear to have rallied against the consistent decline in real wages since 2010 through pressuring high-street shops into providing better value for money. Whether it be menswear, womenís-wear or babyís clothing, June sees the greatest, most extensive drop in prices since documentation began in 2006.
Overall prices dropped 1.8%, in June, on the previous year including a 3.4% drop in non-food commodities, of which clothes and furniture were particularly affected. Even food prices, which had risen consistently for months, only increased by 0.6% in June, down from 0.7% in May.
The exponential price falls can be attributed to the strength of the sterling, which is up 8% against the euro and 13% on the US dollar. As such, the cost of importing has been reduced, thus bolstering the UKís trading position. This combined with cheap, foreign supermarkets, such as Aldi and Lidl, providing stiff competition for supermarket behemoths like Tesco and Sainsburyís, forcing them into pledging ëbillions of poundsí in price cuts.
These factors, coupled with the falling global commodity price inflation, have catalysed the decrease in the official rate of inflation. Standing at 1.5% in May, the low rate will ease pressure on households up and down the UK, loosening the stranglehold on real wages.
Helen Dickinson, the BRC’s director general, said: “June saw plenty of good news for cash-conscious customers, and confirms that retailers have continued to work hard to help budgets go that bit further over the summer.”
Dickinson went on to laud the enduring strength of the pound sterling and the stability of commodity markets, suggesting that these factors are key in ensuring shop price inflation remains as low as possible. Focussing on low food price inflation, the BRC director-general appears to believe that the future is bright for high-street consumers:
ìFierce competition among grocers has driven food price inflation to record low levels and with some grocers having announced plans to keep prices down, consumers stand to benefit for a while to come:î
Undeniably, consumer confidence has been growing in recent times as economic recovery becomes increasingly conceivable. Most surveys display a trend of increased optimism in peopleís prospects for next year, with many chomping at the bit to make substantial purchases. However, the ongoing decline in ëreal-termí wages which permeates our society has led to shoppers warily, yet responsibly, maintaining their hunt for bargains.
Looming Interest Rate Rises
The Bank of Englandís recent threat of interest rate rises later this year is likely to encourage the public to show prudence when indulging in a spot of retail therapy.
According to recently acquired results collected by financial information provider, Markit, the number of people anticipating interest rates to rise in the next six months doubled from 30% to 60%.
Fears will only be exacerbated by weak wage growth in real terms, which have caused households to feel the strain for the majority of the past six years. Earlier this year Samuel Tombs, senior UK economist at Capital Economics, said:
ìThere is a danger that spending growth slows if real earnings do not pick up soon. But we remain optimistic that a further fall in inflation and a recovery in productivity in the second half of this year will lift real pay and hence provide more solid foundations for the recovery in consumer spending.î