Shop price inflation edges up to highest rate since 2013

// January shop price inflation edges up to 0.4% compared to 0.3% in December

// Highest level of inflation since April 2013

// Food inflation remains steady at 1.5%; non-food inflation decelerates to 0.3%

Shop prices in January were slightly up on a year ago despite heavy post-Christmas discounting to mark the fourth consecutive month of increases, new figures show.

According to the latest BRC-Nielsen Shop Price Index, overall shop price inflation accelerated in January to 0.4 per cent year-on-year, up from December’s rate of 0.3 per cent year-on-year.

This is also the fourth consecutive month of price increases and the highest inflation rate since April 2013.

This was driven by a steady inflation rate in food, which came in at 1.5 per cent in January.

This in turn was driven by a surge in fresh food inflation, which rose to 1.2 per cent in January compared to 0.9 per cent in December, while ambient food inflation slowed to 1.9 per cent in January compared to 2.3 per cent in December.

Shop prices in both dairy and meat items fell, but prices increased in the alcohol and fish categories to keep inflation steady.

The BRC forecast that given the underlying drivers of food inflation, such as exchange rates, international food and oil prices, it is likely food inflation will subside over the next coming months.

On the other hand, non-food deflation continued to decelerate, with prices falling by 0.3 per cent in January compared to the 0.4 per cent decline in December.

The BRC said this marked the lowest rate of non-food deflation since March 2013 and reflected reduced levels of discounting in furniture and clothing compared to January 2018.

However, health, beauty and DIY goods all saw price rises, and the BRC predicted that non-food items would “edge towards inflationary territory for the next couple of months”.

“Despite significant post-Christmas discounting, shop prices in January were slightly up on last year,” BRC chief executive Helen Dickinson said.

“Promotions have become the norm in recent years, but it was never going to be possible to continue making seasonal price cuts deeper each year; especially given that the cost of importing many of the goods we buy increased with the post-referendum fall in the pound.

“Consumers have little to fear in terms of inflation over the coming months with many of the underlying pressures on prices easing.

“That is unless the UK leaves the EU without a deal on the 29th March, leading to increases in the price of many goods in the weekly shopping basket.”

Nielsen head of retailer insight Mike Watkins said it was “good news” for consumers looking to save that shop price inflation remained broadly unchanged this month.

“Intense price competition between food retailers at the start of the year is protecting customers from rising prices and there is no inflationary pressure coming from the high street as retailers, faced with weak demand, continue to absorb the impact of any rising costs themselves,” he said.

“The retail outlook is for low growth over the next couple of months and for shop price inflation to remain at around current levels, and less than CPI.”

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