Retailer shares dip as price of clothing and electricals fall

Shares in high street retailers were under pressure today as it emerged prices for goods such as electricals and clothing had continued to tumble.

The British Retail Consortium (BRC) said the cost of non-food items slipped 1.2 per cent in the year to May, compared with a 0.6 per cent annual decline for April.

Shop prices overall rose by 0.4 per cent year-on-year, driven by continued higher food costs.

This compares with a year-on-year rise of 0.8 per cent in April, which the BRC said meant the high street was generating "very little inflationary pressure" to worry the Bank of England.

Strong competition meant shoppers paid 9.1 per cent less for electrical items than a year ago, while the BRC said ongoing price deflation left clothing products 5 per cent lower on a year-on-year basis.

The data added to general nervousness in retail share prices, with Marks & Spencer, Argos owner Home Retail Group and B&Q firm Kingfisher all 3% lower.

Seymour Pierce retail analyst Andrew Wade said the figures added to concerns already weighing on investors.

Mr Wade said: "The sector relative to the FTSE all-share index has dropped back during the last month, as eight out of 10 Footsie retailers have been cautious on outlook in the last 10 weeks."

However, the figures should help allay the Bank of England's concerns that retailers have been pushing up prices in an attempt to boost margins. The Bank's Monetary Policy Committee (MPC) is due to announce the outcome of its monthly rate setting meeting on Thursday.

Kevin Hawkins, director general of the BRC, said: "It has been mooted of late that retailers have been able to pass on rising costs to consumers to protect their margins.

"This is clearly not the case and with recent interest rate rises and higher living costs now starting to adversely influence consumer spending, we would urge the MPC to hold off on a further rise, as the previous four are clearly starting to have the desired effect."