The biggest cuts were to be found in the footwear market and for big-ticket items. Prices of consumer electronics have also dropped over the year. Food prices were discounted for the holiday period to take advantage of higher volumes.
BRC director-general Kevin Hawkins said: 'The disappointing Christmas sales released earlier this week by the BRC indicated high levels of promotional activity throughout December, as many retailers were forced to cut prices to boost trading. This has sent annual high street inflation to a record low. The Bank of England cannot ignore the fact that the weak level of consumer demand and inflation on the high street is not a problem for the economy. With retail price inflation at such low levels and consumer confidence so fragile, dodging the issue of cutting interest rates to help ease consumer blues is no longer viable.'
For a more detailed analysis on the effects of price deflation on the retail sector, turn to pages 24 and 25 in the latest issue of Retail Week.