Latest industry data confirms that shop inflation eased again this month as falling prices in areas such as furniture helped offset stickier inflation in some food categories.
The BRC-NIQ Shop Price Index showed inflation eased to 0.6% in May, down from 0.8% in April. This is below the three-month average rate of 0.9%, with growth now at its lowest since November 2021.
Prices in non-food stores fell 0.8% this month, after a decline of 0.6% in the previous period, as retailers cut prices in an attempt to revive subdued consumer demand for big-ticket items.
Meanwhile, food inflation decelerated to 3.2% in May, down from 3.4%. This is below the three-month average rate of 3.5% and is the thirteenth consecutive deceleration in the food category, with the figure now at its lowest since February 2022.
Fresh food inflation slowed to 2.0%, down from 2.4% in April. However, ambient food inflation only eased marginally, from 4.9% to 4.8%, partly due to prices for sugary products continuing to be impacted by high global sugar costs.
BRC Chief Executive Helen Dickinson noted that shop price inflation has returned to “normal levels”.
She added: “Retailers are playing a key part in bringing inflation down, but future government policy must support this too … As the cost burden of new policies rises – from business rates to packaging taxes – this affects not just the businesses, but their customers too. With an election in a matter of weeks, it is vital that parties detail their support for customers and retailers in their upcoming manifestos.”
Mike Watkins, Head of Retailer and Business Insight ay NIQ, commented: “After a number of months of falling input prices, we are now seeing food inflation stabilise and retailers continue to pass on price cuts to shoppers. Across the industry, whilst inflationary pressure has eased and there is some improvement in shopper sentiment, the unseasonable weather has dampened retail sales so lower prices look set to continue and promotional activity is likely to increase drive demand.”
The official measure of consumer price inflation – which, unlike the BRC index, includes services, energy and travel – fell to 2.3% in April, near the Bank of England target of 2% but higher than economists had expected. That prompted markets to postpone expectations for when the Bank of England would start to cut interest rates, which was previously forecast for June.
