A prolonged run of falling shop inflation has come to an end, with warnings that higher costs for retailers will lead to rising prices for consumers.
The BRC-NielsenIQ Shop Price Index shows prices overall were 0.6% cheaper in November than a year ago. This compares to a 0.8% fall in October and marks the first time in 17 months that inflation has been higher than the previous month, albeit remaining in negative territory.
Non-food deflation eased from 2.1% to 1.8% in November as many retailers unwound some of their discounting as they prepared for Black Friday promotions.
However, food inflation slowed to 1.8%, down from 1.9% in the previous month. This was driven by ambient food inflation, which decelerated from 3.1% to 2.7%. Meanwhile, fresh food inflation rose from 1.0% to 1.2%, driven by items such as seafood, which is particularly vulnerable to high import and processing costs during winter.
“With significant price pressures on the horizon, November’s figures may signal the end of falling inflation,” said Helen Dickinson, Chief Executive of the BRC.
“The industry faces £7bn of additional costs in 2025 because of changes to Employers’ National Insurance Contributions, business rates, an increase to the minimum wage and a new packaging levy. Retail already operates on slim margins, so these new costs will inevitably lead to higher prices. If the government wants to prevent this, it must reconsider the existing timelines for the new packaging levy, while ensuring any changes to business rates offer a meaningful reduction for all retailers as early as possible.”
Mike Watkins, Head of Retailer and Business Insight at NielsenIQ, added: “Shoppers are still being cautious by shopping savvy for the essentials and holding back their discretionary spend, so the lower level of inflation should help sentiment ahead of Black Friday promotions. And with lower inflation than this time last year, many food retailers are extending offers and discounts to help sales momentum in December.”
NAM Implications:
- No surprise?
- So many uncertainties still to emerge from the pipeline.
- Especially from the Budget.
