Shop price inflation hits six-year high

Shop price inflation accelerated in February to 0.7 per cent, up from 0.4 per cent in January – the highest inflation rate since March 2013.

The latest British Retail Consortium (BRC) and Nielsen figures showed food inflation inching up slightly in February to 1.6 per cent, up from 1.5 per cent in January.

Non-food prices rose by 0.2 per cent year-on-year in February, compared to the January decrease of 0.2 per cent. This is the first time that non-food items have been in inflationary territory since March 2013.

February is usually a month when non-food retailers introduce new products at full price, after a January of clearing stock and deep discounting. Therefore, it’s no surprise that non-food prices are higher month-on-month.

In contrast, non-food prices are higher year-on-year for the first time in six years, reflecting the ongoing slow release of significant cost pressures which have built up in the supply chain over the last two years, notably from the currency depreciation in 2016 and the rise in oil prices last year.

However, non-food prices remain below levels seen in 2016, and given weak discretionary spending and intense competition, it is likely that heavy discounting will be back.

BRC chief executive Helen Dickinson pointed out that while price rises over the last six months have been relatively modest, a no deal Brexit would have a much more immediate and dramatic effect.

“If this happens, prices of both food and non-food would rise as a result of any new tariffs, the cost impact of any delays at borders, increased administration, and the likely currency depreciation.”

Mike Watkins, head of retailer and business insight at Nielsen, added that for as long as shoppers continue to be cautious, it will be difficult for the industry to pass on in full any cost price increases coming through the supply chain, particularly as around half of households are still reluctant to spend and many have concerns about the economy.

“Retailers will need to simplify the shopper experience, improve customer engagement and deliver good value for money to encourage shoppers to spend."

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