Shop price inflation hits record low, latest BRC-Nielsen Index shows


Overall shop prices reported deflation for the fourteenth consecutive month in May, accelerating to 1.8% in June, according to the latest BRC-Nielsen Shop Price Index.

This is the deepest level of deflation since the series began in December 2006.

Food inflation fell to 0.6% in June – the lowest ever recorded.

Non-food reported an acceleration in deflation of 3.4% in June from 2.8% in May- the lowest ever recorded.

Helen Dickinson, British Retail Consortium Director General, said: “June saw plenty of good news for cash-conscious customers, and confirms that retailers have continued to work hard to help budgets go that bit further over the summer.

‘’This is the deepest level of deflation in non-food and the lowest rate of inflation for food since 2006 when our records began. Added to this, we see that consumer confidence is at its highest level since April 2005. Fierce competition among grocers has driven food price inflation to record low levels and with some grocers having announced plans to keep prices down, consumers stand to benefit for a while to come. While sports fans are doing well this summer with great deals to be found in Clothing, Footwear and Electricals.

‘’The backdrop was equally promising with stable commodity markets and the continued strength of sterling suggesting inflation is set to remain low in the medium term. Although of course, a strong pound is not so good for those retailers exporting – one exciting and growing area in British retail.

‘’However, it is clear that retailers are making sure these positive economic benefits in the home market are being passed on to consumers while they themselves will cheer on the very low Producer Price Index – an indication of the cost pressures they face.

‘’While the economic recovery continues to gather pace it was not all good news as household disposable incomes remain under pressure. Interestingly, while wage rises remain lacklustre throughout the economy the squeeze on disposable incomes is not coming from retail but other areas if the economy such as leisure and recreational activities.

‘’With shop price inflation at a record low this is undoubtedly an excellent time to go out and find a bargain”.

Mike Watkins, head of retailer and business Insight, Nielsen, said: “Food inflation is still low, many supermarkets are price cutting and non-food prices remain deflationary, so the high street continues to generate little inflationary pressure. Little in the way of immediate seasonal or weather related price increases is anticipated so the outlook for the next three months is for relatively stable shop price inflation. Helped by the increases in consumer confidence since the start of the year, this should encourage shoppers to spend more freely over the summer months.“

Jon Copestake, retail analyst at The Economist Intelligence Unit , said: “A number of factors are combining to bring shop prices down. Not only is the intensification in competition from discounters and online sellers driving a price war among retailers but certain commodity prices have stabilised after the sharp rises of a few years ago. Low wage growth, efficiency gains and austerity among businesses as well as consumers have also acted to keep the price of inputs down.

“This brings good and bad news. For increasingly savvy consumers it is bringing price benefits and the drive towards discounters as well as a willingness to split shopping up between different retaliates to ensure the best deal could present a sea change in British shopper habits. But for retailers the impact is driving down margins and hampering growth. This could mean profit warnings, cost cutting, store closures and job losses as the retail sector continues to adjust to a changing consumer landscape.”