Shop price inflation has fallen to its lowest level in 2023 as food inflation continued to ease and high street stores offered big discounts to tempt customers during July’s unseasonably wet weather.
The overall figure from BRC-NielsenIQ Shop Price Index shows inflation decelerated to 7.6% in July, down from 8.4% in June.
Food inflation fell from 14.6% to 13.4% – the third consecutive deceleration in the sector and the lowest level since December 2022. Fresh food inflation slowed from 15.7% to 14.3%, while ambient food inflation slid from 13% to 12.3%. The BRC noted that it had recorded falling prices across key staples such as oils, fats, fish, and breakfast cereals.
Meanwhile, non-food inflation decelerated to 4.7% in July, down from 5.4% in June, with clothing and footwear retailers offering the biggest discounts in an attempt to mitigate the impact of the wet weather.
Helen Dickinson, Chief Executive of the BRC, stated that the figures give cause for optimism but warned that supply chain issues could again push up input costs in the months ahead.
Russia’s withdrawal from the Black Sea Grain Initiative and subsequent targeting of Ukrainian grain facilities have pushed up global wheat prices in recent weeks, whilst rice export restrictions from India are another area of concern. Dickinson commented: “We expect some global commodity prices to rise again as a result, and food prices will be slower to fall.”
Meanwhile, there are warnings that the price of fruit and veg on supermarket shelves could rise significantly in the weeks ahead due to the heatwave in parts of Europe.
Mintec fruit & vegetable analyst Harry Campbell noted that there were concerns over the quality and size of harvests this year due to the exteme heat in some key growing regions such as Spain.
He is quoted in trade magazine The Grocer as saying: “Given the sensitivity of perishable goods like fruits & vegetables to weather conditions, market players say there could be potential fluctuations in supply and demand patterns, leading to potential price adjustments”.
He also warned that supply to the UK was also becoming deprioritised due to the impacts of Brexit as the UK only receives produce from EU countries after member states had received what they needed first, as it was now “easier” to send goods within the internal EU market.
“Therefore, any shortages that have been caused by the heatwave to crops will be felt in the UK,” Campbell said.
NAM Implications:
- Food Inflation is falling, but many consumers remain stranded on the wrong side of the wealth divide…
- Meanwhile, easy to become discouraged by the key resistors to improvement:
- Russia’s withdrawal from the Black Sea Grain Initiative pushing up grain prices
- Heatwave causing fruit & veg price rises in parts of Europe
- But the stinger in the tail has to be:
- …’the UK only receives produce from EU countries after member states had received what they needed first!’
- …which may be news to some.
- i.e. Full speed ahead for non-EU trade agreements?
