Discounting leads to shop price fall

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The Independent Online

The effect of the foot-and-mouth outbreak on food inflation is starting to ease and contributed to a fall in UK shop prices during July, data published yesterday revealed.

The British Retail Consortium said the diminishing impact both of foot-and-mouth and of the bad harvest earlier in the year had lead to the first monthly fall in food prices this year.

"There is evidence of discounting taking place for beef and other cold meats. In addition the price of potatoes has also fallen," the BRC said.

A continuation of the downward trend in prices of non-food items saw the BRC's Shop Price Index – a measure of the prices of 200 commonly-bought items – fall 1.06 per cent during July.

Heavy discounting in the summer sales and a decrease in the price of medicine following the recent abolition of price-fixing in over-the-counter medicines also contributed to the fall.

On a yearly view, prices were up by 0.37 per cent, the fifth consecutive annual rise but a smaller increase than in any of the last three months. Prices were still lower than when the BRC's index was first constructed in November 1997.

Separately, the Department of Trade and Industry reported a sharp slump in construction orders in the second quarter of 2001. Orders fell 16 per cent on the first quarter, a year-on-year decline of 12 per cent. The private sector was to blame for the falls, with orders from the public sector actually increasing during the period.