Shop Price Declines Sharpest Since 2002

The sharpest annual decline in shop prices since 2002 helped retail sales rise at their strongest level in a decade last month.

The Office for National Statistics (ONS) said shoppers flocked to supermarkets amid their price war and petrol stations to take advantage of plunging pump prices last month.

Prices in stores fell 2.2% in December compared to a year earlier, the biggest drop since June 2002, with the biggest contribution from fuel forecourt costs.

Consumers were able to also take advantage of discounting at many chains, both in store and online.

The data was skewed by the fact that Black Friday sales were included in November's figures for 2014 but were recorded within December's numbers the year before.

Nevertheless, the ONS said overall sales jumped 5% in the three months to December on the same period last year - the biggest increase since 2004.

The performance was far better than economists had expected.

Many had forecast weaker sales on the previous year because of the impact of the Black Friday frenzy in November, which sparked a 1.6% surge in overall sales on the month.

Supermarket prices fell 0.9% in December, reflecting the price war but also falling commodity costs.

Department stores suffered the most from the impact of Black Friday as their online sales fell year on year for the first time since records began at the start of 2008.

Month-on-month volumes for these stores fell by 4.5%, the worst decline since January 1996.

Ian Geddes, UK head of retail at advisory group Deloitte, said: "This was a good Christmas with some strong performances, but it seems the real winner was the consumer.

"Intense competition and deep discounting both before and after Christmas drove sales but will have hit profits hard.

"When Black Friday comes next year many retailers will think very carefully about how to maximise the unquestionable customer demand while taking into account how it impacted profitability and trading through the Christmas period."

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