Overall shop prices reported deflation of 1.7% in October from the 1.8% decline in September, according to the latest BRC-Nielsen Shop Price Index. This is slightly behind the 3-month average of -1.8%.
Non-food deflation remained unchanged at 2.1% for the second consecutive month. This is behind the 3-month average of -2.2%.
Food deflation decelerated marginally to 1.2% in October from 1.3% in September. This is in line with the 3-month average.
Shop price deflation is likely to move closer to zero at the turn of the year and could even move into inflationary territory at some point during the first half of 2017.
Helen Dickinson, chief executive, British Retail Consortium, said: “Shop price deflation continues unabated, with October shelf prices coming in 1.7% lower than in the same month last year – almost unchanged from the 1.8% registered in September. Non-food deflation of 2.1% was unchanged for the second consecutive month, and came in significantly higher than food deflation of 1.2%. The divergence in ambient and fresh food deflation was marked – fresh food prices were 2.0% lower than in October 2015, while ambient prices were just 0.2% lower.
“While we know that the devaluation of sterling since the Brexit vote is stoking inflationary pressures, the good news for consumers is that retailers have been successful in managing this to date and there is still no impact visible in shop prices. However, it is inevitable that imported inflation will begin to make its mark and we would expect to start to see this effect coming through in the first quarter of 2017.”
Mike Watkins, head of retailer and business insight, Nielsen: “Supermarkets are keeping prices low and inflationary pressure in the supply chain is not yet being passed on, as competition for the wallet of the shopper continues to be intense. Fresh food is a key battle ground for attracting new shoppers and there have further price cuts in recent months. Across the non-food channel it is unseasonably warm weather that is having the biggest impact on sales so retailers are holding prices and making promotions attractive to help encourage visits to store.”