Shop price deflation slows to four-year low

shop price index

Shop prices decreased at their slowest rate in four years during October, as a squeeze on discretionary spending power slows retailers from passing on rising costs.

According to the latest BRC-Nielsen Shop Price Index, overall prices last month decreased by just 0.1 per cent – the same year-on-year rate as in September and the shallowest deflation rate in the last four years.

For non-food items, deflation was 1.5 per cent – also the same rate as September.

Meanwhile, food prices continued to remain in inflation territory with a 2.2 per cent increase – also the same as in September.

Of the food prices, fresh food inflation accelerated to 2.2 per cent in October compared to 1.8 per cent in September, while ambient food inflation eased to 2.2 per cent from 2.7 per cent in September.

British Retail Consortium (BRC) chief executive Helen Dickinson said the latest monthly index showed there were “enormous challenges” facing retailers.

“While retailers are doing their best to provide value to keep prices low for consumers who are feeling the pinch of falling real wages, in an industry where margins are already low, the capacity to absorb further cost increases is wearing thin,” she said.

“That’s a particular concern as retailers face paying an additional £270 million in business rates next year.

“We urge the Chancellor to take the opportunity in his budget this month to freeze rates in order to encourage investment, to safeguard shops in economically vulnerable communities and to enable retailers to keep prices low for the UK’s households.”

Nielsen head of retailer insight Mike Watkins added: “Disposable income is coming under pressure, however consumers are benefiting from the continuation of promotional activity, the use of vouchers and price cutting, in particular by supermarkets.

“This is going some way towards making up any shortfalls in spending power as cost price inflation begins to impact prices.”

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