Shop prices fall at fastest rate since 2006

Shop prices fell by 2.4 per cent in May, compared to a 1.7 per cent decrease in April, marking the highest rate of decline since the British Retail Consortium (BRC) and Nielsen began the series in December 2006.

Non-food prices fell by 4.6 per cent in May, compared to a decline of 3.7 per cent in April – also the highest rate of decline since December 2006.

Food inflation eased to 1.5 per cent in May, down from 1.8 per cent in April, while fresh food inflation slowed to 0.5 per cent in May, from one per cent in April, and ambient food inflation decelerated slightly to 2.9 per cent in May, from three per cent in April.

BRC chief executive Helen Dickinson said the record falls were largely driven by the drop in non-food prices.

Clothing and furniture saw the biggest drop as retailers ran promotions to encourage consumer spending and attempted to mitigate recent losses.

“Year-on-year food prices increased slightly due to higher business costs, implementing social distancing measures and the upward pressure from labour shortages, but were down on the previous month as more home-grown produce became available,” she stated. “We expect to see continued upward pressure on food prices from the effects of the pandemic in the coming months, while non-food prices are likely to remain deflationary with subdued sales.”

Even as non-essential shops begin to reopen from 15 June, consumer demand is expected to remain weak and many retailers will have to fight to survive, especially with the added costs of social distancing measures, noted Dickinson.

“Retailers face an uphill battle to continue to provide their customers with high quality and great value products despite mounting costs – government support remains essential, both to rebuild consumer confidence and to support the thousands of firms and millions of jobs that rely on it.”

Mike Watkins, head of retailer insight at Nielsen, added: “Across the major supermarkets with sales growths in high single digits in May, the consumer spend on promotions has also been at an all-time low, but there has been little upwards pressure on prices.

“However, as we move towards summer with the importance of seasonal foods and with the supply chain still disrupted, we can anticipate some volatility in prices.”

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