Shoppers in Scotland have continued to enjoy falling prices, but growing cost pressures are likely to feed through to the tills, the Scottish Retail Consortium (SRC) has warned.
The warning came as new figures showed the first sign of an upward trend in shop prices, with deflation easing in December and the cost of clothing and footwear increasing.
Overall, prices were down 1.4% last month on the same time last year, compared with falls of 1.7% in the previous two months, according to the latest BRC-Nielsen Shop Price Index.
But the majority of categories monitored for the index saw month-on-month increases in prices, with clothing and footwear seeing inflation for the first time in nearly two years.
SRC director David Lonsdale said Scottish shoppers were continuing to benefit from the effects on prices of stiff competition in the industry and the effectiveness of retailers in managing costs.
He added: “Cost pressures are undoubtedly building, due to currency movements affecting imported goods in the supply chain, but also frankly from government policy decisions primarily affecting expenditure on property and people.
“These cost pressures are likely to feed through into retail prices, though the timing and extent of any increase will differ from one category and retailer to the next. However, value-driven and informed customers mean shopkeepers will have to remain competitive.”
Food deflation decelerated marginally to 0.7% in December from the 0.8% fall in November, fuelled by the ongoing supermarket price war, while fresh food deflation remained at 1.2% for the second consecutive month, but was down form the three-month average of 1.5%.
Ambient food saw inflation for the first time since June, up 0.1% in December, from the 0.1% decline in the previous month.
British Retail Consortium chief executive Helen Dickinson said: “We’ve said for some time that we expect to see the underlying inflationary pressures, notably from the post-referendum fall in the value of the pound, feed through into shop prices.
“It’s to early to confirm that this is what we’re seeing in December’s figures: timings of seasonal discounts can cause seasonal fluctuations at this time of year and retailers have continued to find ways to mitigate the impact on consumers.
“However, we expect the general trend in inflation to be upwards over 2017.”
