Consumers 'are spending money on paying off credit cards and not in the high street'
Prices at the shops are decreasing because people are spending their money on things like overpaying their mortgages or paying down their credit cards, it has been suggested.
Consumers 'are spending money on paying off credit cards and not in the high street'”
David Kuo, head of personal finance at Fool.co.uk, said consumers are not spending money at the shops.
For this reason, retailers are reducing their prices to encourage spending, leading to price deflation.
His comments follow the release of the latest BRC-Nielsen Shop Price Index, which showed there was an annual shop price deflation of 0.1% last month, the first time the index has shown deflation since February 2007.
According to BRC-Nielsen, the deflation has been driven by a sharp fall in food inflation over the last six months.
Mr Kuo explained that if it was the other way round, and there were too many people looking for insufficient goods, prices would start to increase.
"People are not spending money. If they do have any money they are using it to pay down debt, which we know as a fact - that has come out of the Bank of England's monthly lending statistics," he said.
"People are overpaying their mortgages, people are paying down their credit cards, and that's why the shops are seeing reduced demand and the lowering of prices."
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