Shoppers boost budgets as food prices fall, latest BRC-Nielsen Shop Price Index shows

FacebooktwitterredditpinterestlinkedinmailFacebooktwitterredditpinterestlinkedinmail

Overall shop prices reported deflation of 2.0% in June, deepening from the 1.8% decline in May. This is lower than the 12-month average of -1.8%, according to the June BRC-Nielsen Shop Price Index.

Non-food deflation fell to 2.8% in June from 2.7% in May. Food deflation deepened further in June, falling to 0.8% from 0.3% in May.

Fresh food reported a further acceleration in its deflation rate, falling to 1.5% from 0.8% in May. This is the deepest deflation rate since September 2015. Ambient food inflation decelerated to 0.1% in June from 0.4% in May.

Helen Dickinson, chief executive, British Retail Consortium, said: “This month’s figures show overall shop prices falling once again. This extraordinary 38 month run of deflation has undoubtedly been good for consumers. While it has been driven largely by falling prices for non-food items we have, from time-to-time, seen food in deflationary territory as well – which provides the real boon for household budgets. June was one of those months with food prices falling by 0.8 per cent, the deepest deflation in food for over a year.

“While the good news for household budgets continues, prices in store will eventually rise again. However, the time it takes for any price increases to make a re-appearance will depend on a combination of factors including the future value of the pound, commodity prices and any eventual impact of last week’s Brexit vote on input costs. That said, there won’t be any instant shocks as any changes will take time to feed through. Continuing fierce competition also means that putting up prices may not be viable for some retailers. For now, and for the short term at least, the good news for consumers is set to continue.”

Mike Watkins, head of retailer and business Insight, Nielsen, said: “Whilst changes in the economic landscape are anticipated next year, the current focus for the industry is the continued deflationary environment. This is good news for shoppers who benefit from falling prices but is added pressure for retailers as they balance increased costs from the national living wage and investment in multi-channel, with volatile consumer demand. A return to inflation is not expected just yet so it`s business as usual over the summer months and encouraging shoppers to keep spending is the priority.”