Shop prices rise in June but deflation persists for non-food goods

By

Barbara Santamaria

Published
Jul 5, 2017

Shop prices were 0.3% lower in June than the same month last year, marking a potential end to a four-year deflationary trend as the pound’s depreciation and rising commodity prices push overall prices up.

June’s result comes after a 0.4% fall in May and is the shallowest deflation rate since November 2013.

The slowdown comes as a result of higher food prices, up 1.4% year-on-year, but prices of non-food products remained in negative territory in June as retailers continued to absorb the rising costs themselves due to the highly competitive market.

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Indeed, non-food prices dropped by 1.4% last month, compared with a deflation of 1.5% in May and April’s 1.4% fall.

Despite this, the British Retail Consortium said it has seen overall prices rising over the last six months and that further prices rises are “inevitable”.

“The reality is that cost pressures faced by retailers continue to mount,” said Helen Dickinson, chief executive of the British Retail Consortium.

“These pressures arise both from market driven increases in the underlying cost of goods and as a result of Government policies. There is a limit to the ability of retailers to protect consumers by absorbing these impacts into their margins, as a result further price increases are inevitable. With that in mind and with the UK’s trading relationships under discussion, it’s of the utmost importance that the Government does all it can to limit any further cost increases that could further adversely impact the finances of the UK’s consumers.”

Mike Watkins, head of retailer and business insight, added: “With inflation rising in essential goods and services, many households are now seeing their monthly household expenditure come under pressure.  Whilst this may add to the uncertainty around discretionary spending, the good news is that shop prices are increasing at a slower rate. Shoppers are also able to find further savings in retail with low price strategies across the grocery sector and competition across the marketplace keeping prices as low as possible.”