Shop prices nearing end of four years of deflation, figures indicate

Shop prices bordered closer to closing a four-year trend of deflation in June as the results of the pound’s depreciation and increasing commodity costs built up, numbers from studies show.

Overall shop prices were falling 0.3% year-on-year, the slightest deflation rate since November 2013, according to the newest BRC-Nielsen Shop Price Index.

Food prices rose on average by 1.4% in June, a comparable pace to May’s increase and the largest since January 2014.

Fresh food prices seem to be on an upward trend, showing a 1.4% gain in June, 0.2 percentage points larger than in May and the biggest jump since February 2014.

Mike Watkins, head of retailer and business insight at Nielsen, said: “With inflation rising in essential goods and services, many households are now seeing their monthly household expenditure come under pressure.

“While this may add to the uncertainty around discretionary spending, the good news is that shop prices are increasing at a slower rate.

“Shoppers are also able to find further savings in retail with low price strategies across the grocery sector and competition across the marketplace keeping prices as low as possible.”

British Retail Consortium chief executive Helen Dickinson said: “The fact that the headline number, minus 0.3%, shows that prices are still down on last year should not be misunderstood.

“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.”

Ms Dickinson said the continuous inflation in June was expected to be a “brief hiatus”, and the anticipation was for shop prices to maintain trending upwards in coming months to come.

She added: “The reality is that cost pressures faced by retailers continue to mount. These pressures arise both from market-driven increases in the underlying cost of goods and as a result of Government policies. There is a limit to the ability of retailers to protect consumers by absorbing these impacts into their margins. As a result, further price increases are inevitable.

“With that in mind and with the UK’s trading relationships under discussion, it’s of the utmost importance that the Government does all it can to limit any further cost increases that could further adversely impact the finances of the UK’s consumers.”