Falling non-food prices now in their third year, BRC-Nielsen Shop Price Index shows

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Overall shop prices reported deflation of 1.9% in May unchanged from April, according to the latest BRC-Nielsen Shop Price Index.

Food reported annual deflation of 0.9% in April for the third consecutive month. On a 12-month average basis, the Shop Price Index reported deflation of 1.8%. Non-food deflation remained at 2.5% in May.

BRC Director General, Helen Dickinson, said: “Prices in Britain’s shops continue to fall, this month by -1.9 per cent.

“Food prices remained at their record low for a third consecutive month, with low priced fresh food helping to keep prices down. We’ve now had five consecutive months of food prices falling. While ambient food saw a small rise fresh food hit a new record low.

“May saw the 25th consecutive month of falling shop prices and falling non-food prices now in their third year.

“Wider macro-economic data continues to be supportive for the consumer. The main measure of UK inflation turned negative in April for the first time on record, with the rate falling to -0.1%. This is expected to be temporary and should result in increased consumer spending. The price of staple commodities (wheat, corn and soybean) remain low and consumer confidence is still hitting a thirteen year high.

“Now that the General Election has taken place, government policy is likely to advance rapidly. A number of areas will obviously require consideration, not least, ensuring that the structural review of business rates remains ambitious and far-reaching. This is vitally important for retailers who are presently burdened with above inflation operating costs.”

Mike Watkins, head of retailer and business insight, Nielsen, said: “Retailers continue to use price cuts and promotions to stimulate sales which is helping to maintain shop price deflation, and we see little evidence to suggest that prices will rise in the near future. With many food retailers still using price cuts to attract new shoppers, this is lowering the cost of the weekly shop and so the overall CPI figure in the UK. Deflation and price led competition will continue to be a key driver of sales growth for some time yet.”