No sign of end for shop price deflation, BRC-Nielsen Shop Price Index May 2016 shows

FacebooktwitterredditpinterestlinkedinmailFacebooktwitterredditpinterestlinkedinmail

Overall shop prices reported deflation of 1.8% in May from the 1.7% decline in April. This is broadly in line with the 12-month average, according to the BRC-Nielsen Shop Price Index for May 2016.

Non-food deflation slowed to -2.7% from 2.9% in April. This is in line with the 12-month average.

Food moved back into deflationary territory in May as it continues to fluctuate around the zero mark.

Fresh food reported an acceleration in its deflation rate, falling to -0.8% from 0.5% in April. This compares with the deepest deflation rate of 2015 which was reported in May 2015.

Ambient food inflation fell back to 0.4% in May after accelerating sharply in April to 1.0%.

Helen Dickinson, chief executive, British Retail Consortium, said: “The fact that today’s figures remain deflationary doesn’t come as a great surprise. We’ve experienced a record run of falling shop prices and, for the time being, there’s little to suggest that’ll end any time soon – so the good news for consumers continues. Indeed, with food prices remaining flat at the same time as wages continue to grow means customers will have yet more money in their pockets at the end of their weekly shop.

“Looking slightly longer term we know that the recent commodity price increases will start to put pressure on retailers to raise their own prices. We would normally expect these input costs to filter through to prices eventually, but the big question is how far fierce competition in the industry will insulate consumers from price increases.  If retailers do continue to absorb these costs it’ll be more important than ever that other external costs, business rates chief among them, are brought under control.”

Mike Watkins, head of retailer and business insight, Nielsen, said: “Shop price inflation remains below consumer price inflation and falling food prices are still being driven lower by global commodity prices as well as intense competition, which shows no sign of relenting any time soon. Non-food prices also continue to fall, and with shoppers indicating that they are becoming more cautious about spending, retailers will have to keep prices the same or probably even lower over the next six months.”