Retail prices fell slightly faster in June compared with May, but this trend is not expected to last as retailers battle rising costs.

Shoppers on a High Street

The rate of shop price decline rose slightly to 0.7% year-on-year in June compared to the equivalent figure in May of 0.6%, the BRC-Nielsen Shop Price Index showed.

Shop price deflation in June remained at a slower rate of decline than the 12-and-6 month average price decreases of 1.6% and 1.6%.

British Retail Consortium chief executive Helen Dickinson said: “There is good news for consumers as June saw overall prices fall at a slightly faster pace than last month.”

“Non-food prices, particularly for fashion, remained deflationary as businesses tried to prolong the recent pickup in consumer spend. Food prices also fell, which is a testament to supermarkets battling to keep prices low for their customers.”

In June, non-food deflation rose to 1.0% versus May’s 0.8%. Food price deflation was 0.2% during this period compared to 0.3% in May, marking the third consecutive month of food price falls.

Brexit and Covid-19 may hike retail prices

Retail price rises may also be on the horizon as retailers face increasing levels of disruptions due to the pandemic and Brexit. 

Dickinson said: “Retailers’ costs are continuing to mount due to global food price increases, Brexit red-tape, Covid related supply chain disruption, raw commodity shortages and increased shipping and petrol costs.”

“The increasing cost burden on retailers may be passed onto the consumer, threatening price rises as the pressure mounts in the months ahead, especially with additional Brexit checks this autumn.”

She urged the government to reduce the potential impact on consumers by ensuring that the new Brexit checks avoid adding extra disruption to the import of goods.

NielsenIQ head of retailer and business insight Mike Watkins added: “The fact that shop prices remain in negative territory despite the recent rise in CPI is indicative of the competitive retail landscape in the UK. Keeping prices low for as long as possible is good news for shoppers.”

“However, with 4 in 10 shoppers watching their spending more than they were before the pandemic, this suggests that many millions of households are going to see their budgets squeezed should prices start to rise.”