Shop prices “teetering” on return to inflation

The British Retail Consortium has revealed that shop prices reached the shallowest deflation level in the last four years in September, with prices falling just 0.1 percent compared to a 0.3 percent year-on-year decline in August.

The BRC Nielsen Shop Price Index showed that price deflation on non-food items accelerated to 1.5 percent in September, compared to 1.3 percent in August, although it did add that non-food prices are “less deflationary” than in September 2016, when they had fallen 2.1 percent year-on-year.

Helen Dickinson, chief executive of British Retail Consortium said: “Overall shop price deflation reached an all-time low in September with prices now teetering on the edge of inflation. A number of factors have combined to drive a sharp jump in food price inflation to 2.2 percent over the year to September. A global milk shortage has pushed up butter prices, while rising global cereal prices earlier in the year are now feeding onto shop shelves.

“Meanwhile retailers’ efforts to shield shoppers from the impact of higher import prices of basic non-food items are holding out for now. However, as more non-food retailers’ hedging facilities come to an end this autumn, and as public policy costs mushroom, consumers are likely start feeling an additional pinch on these products.”

Dickinson also called on the government to reach a “prompt agreement" with the EU on the terms of a Brexit transition, to ensure that retailers aren’t faced with a “cliff edge scenario” that could mean tariff-related price increases on top of those they are already paying.