UK shop prices fell at their fastest annual pace in seven years last month as stores heavily discounted goods in the January sales, a survey has found.
Retailers tried to compensate for a poor Christmas, the BRC says
A campaign of "aggressive" price cuts took place after slow sales over the Christmas period, the British Retail Consortium (BRC) said.
The BRC said shop price inflation fell 1.54% in the year to January, from 1.41% in the 12 months to December.
But the group found food prices had increased over the year.
"The heavy discounting seen at the beginning of December became more aggressive throughout the January sales, with many retailers making further reductions and sharp price cuts in the hope of compensating for the disappointing Christmas," said BRC director general Kevin Hawkins.
Interest rate impact
The BRC survey found the prices of clothing and footwear were cut before Christmas and further discounts were introduced in January.
The price of electrical goods, which had been falling throughout 2004, also moved lower last month.
Meanwhile, numerous promotions surrounded big-ticket items such as furniture - sales of which have been hit by interest rate rises.
An earlier BRC survey found total sales in January 2004 by value, were, in fact, 0.5% higher than a year earlier.
But that data also suggested that the January sales had failed to help many High Street retailers recover from a poor Christmas season.
Jonathan Grassi, director of the retail corporate finance team at consultants Deloitte, said the January shop price data may have been distorted somewhat by the heavy discounting.
But he added: "The figures reinforce what we have been hearing anecdotally and broadly support what has been directionally shown by other recent statistics."