Shop price rises ‘inevitable’ as inflation piles pressure on retailers

An extended period of declining shop prices is almost done as inflation presses retailers’ margins, making price increases “inevitable”, the British Retail Consortium has cautioned.

Shop prices dropped 0.3 percent in June in comparison to a year ago, in reference to the BRC-Nielsen Shop Price Index. However, this was the slightest level of deflation since November 2013.

Helen Dickinson, chief executive of the BRC, stated that the data indicated that the UK retail division had “edged” towards “ending a four-year deflationary trend”.

She advised that shops could only grasp the impact of inflation on their profit borders for so long and that price increases are “inevitable”.

Helen Dickinson, BRC chief executive, said: “the year-on-year numbers belie the fact that prices have been heading upwards for the last six months.”

“The fact that the headline number, -0.3pc, shows that prices are still down on last year should not be misunderstood,” Ms Dickinson said.

“The year-on-year numbers belie the fact that prices have been heading upwards for the last six months; it’s just that significant deflation in the second half of 2016 means there has been considerable ground to make up in the year-on-year figures.”

The newest data from the Bank of England note that overall inflation remains at 2.9 percent.

The BRC data exposed that non-food prices fell by 1.4 percent year-on-year in June, while food prices grew 1.4 percent.

Ambient food inflation moderated to 1.5 percent in June from the 1.8 percent increase reported in May, but fresh food prices raised by 1.4 percent, a 0.2-percentage-point rise from last month and the fastest increase since February 2014.

Mike Watkins, head of retailer and business insight at Nielsen, said that while households were being placed under stress by growing inflation, “the good news is that shop prices are increasing at a slower rate”.

He additionally said that the price war among grocery stores and competition in the retail division was “keeping prices as low as possible”.