Shop price inflation accelerates despite festive discounting

Prices climbed 0.3% during the month – the highest rate of inflation since April 2013.

It also marked only the fourth month of inflation in the past five years, according to the BRC-Nielsen Shop Price Index.

Deflation in non-food prices decelerated to 0.4% last month, compared to 0.8% in November.

But food prices grew 1.5% in December, as inflation within ambient products accelerated to 2.3%, compared to 2.1% the prior month.

Inflation in fresh, however, slowed to 0.9% last month from 1.2% in November. 

The BRC said the easing in fresh food inflation was “the first indication of the downward pressures for the category from lower international food prices.

Global food prices have been in decline since May 2018, but the BRC said it takes “seven to 10 months” for changes to filter into price decreases at the shelf edge.

However, BRC boss Helen Dickinson warned: “Shoppers may have become accustomed to great value, but Brexit uncertainty means that a continuation of the low prices is by no means guaranteed.

“Without a trade deal with the EU, the cost of importing many of the goods we buy day to day will go up significantly and retailers simply do not have the room in their margins to protect consumers from those costs.

“Unless Parliament comes together behind a deal that ensures frictionless, tariff-free trade we could see prices paid by UK households rise substantially.”

Nielsen’s head of retailer and business insight Mike Watkins added that retailers had to “work hard” over the Christmas period to “encourage” customers to shop.

He said discounting was “deeper and began earlier” as a result, across both non-food and food, with supermarkets resorting to “unprecedented levels of vouchering” during December.

Watkins said: “Retailers know that customers are worried about their personal finances, so they will continue to do all they can to limit price rises over the next few months despite the external pressures.”