Shop prices have remained in a state of deflation in February, but there are warnings that inflation can rise due to recent price hikes, geopolitical tensions, and the £7bn in added retail costs.
Overall, shop price deflation was 0.7% in February, remaining the same from January and slightly below the three-month average of 0.8%, according to the latest BRC-NielsenIQ shop price index data.
Non-food deflation increased to 2.1% in February from 1.8% the month before, making this the same as the three-month average rate of 2.1% deflation.
Food saw a year-on-year rise in inflation from 1.6% in January to 2.1% in February, above the three-month average of 1.8%.
Fresh food inflation saw a 1.5% annual increase in February, against a growth of 0.9% in January, while ambient food inflation increased 2.8% from 2.5% in January.
Both fresh and ambient food inflation are above the three-month average.
BRC chief executive Helen Dickinson said: “While shop prices remained in deflation in February, prices on the month saw the biggest increase in the last year. Breakfast, in particular, got more expensive as butter, cheese, eggs, bread and cereals all saw price hikes. Climbing global coffee prices could threaten to push the morning costs higher in the coming months.
“In non-food, month-on-month prices rose as January sales promotions ended, especially in electricals and furniture. But discounting is still widespread in fashion as retailers tried to entice customers against a backdrop of weak demand.
“Inflation will likely rise across the board as the year progresses, with geopolitical tensions running high and the imminent £7bn increase in costs from the Autumn Budget and the new poorly designed packaging levy arriving on the doorsteps of retailers. We expect food prices to be over 4% up by the second half of the year.
“If the government wants to keep inflation at bay, enable retailers to focus on growth, and help households, it must mitigate the swathe of costs facing the industry. It can start by ensuring no shop ends up paying more than they already do under the new business rates proposals, and delaying the new packaging taxes.”
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