Shop prices fall again to mark five years of deflation

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shop price index

Shop prices across the UK dropped again in April to mark five years of overall retail prices being in deflationary territory.

According to the British Retail Consortium (BRC) and Nielsen’s monthly Shop Price Index, overall shop prices fell one per cent year-on-year in April, matching March’s pace of decline and the deepest deflation since February 2017.

The drop in prices came as upward pressure from the fall in the pound weakened, but it still disguised a widening gap between rising prices for food and falling prices for other goods.

Deflation in non-food prices was deeper in April than in March, with prices decreasing at a rate of 2.2 per cent compared to March when prices declined by 1.9 per cent.

Meanwhile, food inflation picked up to one per cent in April from 0.4 per cent in March thanks to higher global commodity prices.

After three months of consecutive slowdown, fresh food inflation reversed course in April as prices rose by 0.9 per cent compared to 0.3 per cent in March.

Finally, ambient food inflation accelerated in April to 1.2 per cent compared to 0.6 per cent in March.

BRC chief executive Helen Dickinson said: “The upward pressure on prices from the fall in the pound is weakening, leaving underlying commodity prices and strong competition for customers the key influences on inflation.

“Higher global commodity prices than last year pushed food price inflation upwards in April.

“On the other hand, non-food prices sunk further into deflation as retailers continue to respond to the squeeze on households’ discretionary spending by offering low and falling prices.

“As negotiations on Brexit continue to play out against this backdrop the importance of addressing the issue of frictionless movement of goods across borders is increasing.

“Retailers must have clarity on this position if they are to continue to provide a wide range of goods for consumers at affordable prices.”

Nielsen’s head of retailer insight Mike Watkins added: “With weak consumer demand, any success in sales performance is coming at the expense of retailer’s margins, with lower prices in non food and inflation now hovering around one per cent in food stores.

“Recent industry data suggests poor footfall and with unseasonably cool weather punctuated by a brief hot spell, sales momentum has been hard to sustain.

“So whilst promotional activity continued after Easter, retailers are still keeping prices competitive to tempt shoppers back into store as consumers not yet feeling better off.”

The news comes as Bank of England officials observe the outlook for inflation ahead of a meeting and policy decision due next Thursday.

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