Shop prices drop again in May amid tough conditions

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June shop prices

Deflation deepened in May as retailers were forced to compete in a “challenging” market environment, new figures show.

Overall shop prices fell by 1.1 per cent in May compared to the same month last year, marking the 61st month of deflation and the deepest since January 2017, according to the monthly BRC-Nielsen Shop Price Index.

Prices of non-food items in May were 2.5 per cent lower year-on-year, their deepest deflation in that category since August 2016.

However food inflation went up 1.2 per cent, up from the one per cent recorded in April as weather and oil prices had an impact on global agricultural markets.

Of the food category, ambient food inflation accelerated 1.7 per cent, up from 1.2 per cent in April while fresh food inflation was unchanged at 0.9 per cent.

The British Retail Consortium (BRC) said it expected overall food prices to fall in coming months.

“Overall shop prices fell again in May as the impact of the pound’s fall following the EU referendum reduces and the challenging retail environment continues to mean retailers must compete on price,” BRC chief executive Helen Dickinson said.

She added: “Retailers’ overall sales revenues are under pressure from falling prices and this comes at the same time as business rates and other public policy decisions are pushing up operating costs, leaving retailers squeezed at both ends.

“The consequences of which have been plain to see.

“Government and policy makers must do more to address the burden of business rates and help to ease the pressure.”

Nielsen head of retailer insight Mike Watkins highlighted that despite a small increase in food prices in recent weeks, the Shop Price Index remained lower than the Consumer Price Index, one of the measures for inflation used by the Office for National Statistics.

He added that the recent summer weather has lifted food sales.

“In contrast, we are seeing further deflation in the non-food channel and there has been little momentum in retail sales,” Watkins said.

“With continued increases in crude oil prices now adding further cost to the supply chains and weak demand on the high street, retailers need to be cautious about passing on any price increases over the next few months.

“The good news is, after a difficult couple of months, shoppers now seem to be spending again.”

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