Shop prices return to inflation as retailers battle cost pressures

Shop price inflation increased to 0.4% year on year in June, above the three-month average and against a 0.1% decline in May, according to the latest BRC-NielsenIQ shop price index data.

Non-food deflation increased to 1.2% in June against a decline of 1.5% in May and above the three-month average of 1.4% delfation.

Food inflation was up 3.7% year on year in June, against growth of 2.8% last month and also above the three-month average of 3.1%.

Meanwhile, fresh food inflation rose to 3.2% in June against growth of 2.4% in May, and above the three-month average of 2.5%. Ambient food inflation also increased to 4.3% in June, up from growth of 3.3% in May and sitting above the three-month average of 3.8%.

BRC chief executive Helen Dickinson said: “Within three months of the costs imposed by last autumn’s Budget kicking in, headline shop prices have returned to inflation for the first time in close to a year. Food inflation showed little sign of slowing down, particularly in fresh produce, where prices of meat have been impacted by high wholesale prices and more expensive labour costs.

“Meanwhile, fruit and vegetable prices increased due to the hot, dry weather reducing harvest yields. Non-food goods remained in deflation as retailers cut prices across product categories, especially DIY and gardening so customers could make the most of the sunshine.

“Retailers have warned of higher prices for consumers since last year’s autumn Budget and the huge rises to Employer National Insurance costs and the National Living Wage. We predicted a significant rise in food inflation by the end of this year, and this has been accelerated by geopolitical tensions and impacts of climate change. To limit further rises, Government must find ways to alleviate the cost pressures bearing down on retailers. The upcoming business rates reform offers such an opportunity, and the Government must ensure no shop pays more as a result of the changes.”

NielsenIQ head of retailer and business insight Mike Watkins added: “Price increases are being driven by broader economic conditions and ongoing changes in the supply chain. While the current spell of good weather is helping to boost demand at many retailers, rising prices could become a concern if consumer willingness to spend declines later in the year. Which means we can expect retailers to reinforce their value-for-money messages over the summer.”