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Supermarket price deflation attributed to CPI in the UK hitting zero for the first time

Published:  09 April, 2015

The supermarket price wars that have been plaguing the retail sector for months have been a contributing factor to the Consumer Price Index falling to zero for the first time on record, according to British Retail Consortium.

The fall in CPI could potential benefit more premium wine brands as consumer will find more money in their pockets at the end of the month and a willings to trade up to more proemial products.

The CPI is a measurement that averages the cost of a set of items in a basket and assesses price changes associated with the cost of living.

The drop in the CPI "is largely the result of a deep oil price slump (down 49 per cent on a year ago) and the continuing fierce competition among supermarkets who've dropped fuel and food prices over the year," said BRC director general Helen Dickinson.

Overall shop prices reported deflation for the 23rd consecutive month, accelerating to 2.1% in March, from 1.7% in February, according to a BRC statement.

"Prices in Britain's shops reached another new low, this month by -2.1% That's the deepest deflation rate since our records began in December 2006," said Dickinson.

Although the price drops are challenging for retailers, it is not all bad news as consumers now have more money to spend in real terms with the CPI being flat.

Dickinson said: "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." 

Further the extra money in shoppers' pockets is boosting consumer confidence which hit a 13 year high. With consumer confidence rising more shoppers are willing to buy up because they can afford to do so.

"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," said Dickinson.

Additionally Dickinson said with stronger consumer confidence more people could be out shopping in stores and online in the coming weeks.  She said: "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."