Shop price inflation falls to lowest level ‘since cost of living crisis began’

Shop price inflation has fallen to its lowest level since the cost of living crisis arguably began, new data from the British Retail Consortium (BRC) has shown.

Shop prices grew at a rate of 1.3% in March, a 1.2-percentage point decrease on February’s 2.5% inflation figure. It means price hikes are now at their lowest level since December 2021.

Prices actually fell slightly month-on-month, with non-food items leading the way with a 0.4% drop and food costs falling 0.3%. The BRC said the latter had come as a result of heavy promotional activity in supermarkets ahead of Mother’s Day and Easter.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

Despite the good news, the retailer trade body said additional cost pressures from April onwards could cause store prices to rise again. The National Living Wage - the legal minimum for adults over the age of 23 - is rising 9.8% from 1 April, while business rates are also set to increase.

It comes as headline consumer price inflation slowed to 3.4% in February. Interest rates are at a 16-year high, but are expected to be cut soon.

Food price hikes continue to fuel shop price inflation

Food price inflation continued to decelerate, according to the latest set of BRC figures.

The data, which was taken during the first week of March 2024, showed the rate of hikes across fresh, frozen and ambient (such as cereals, pasta and chocolate) edible products slowed to 3.7% from 5% in the previous month.

It means food inflation is at the lowest rate recorded by the BRC since April 2022. But the BRC’s analysis partner NielsenIQ pointed out that it was “expected” given the fact the inflation rate in March 2023 - the month the latest figures were compared against - sat at 15%. 

Within the headline food figure, fresh food slowed from an inflation rate of 3.4% to 2.6% between February and March. This came as a result of a drop in dairy prices. Ambient products continued to go up in price at a significant rate year-on-year, although inflation for the category fell two-percentage points to 5.2%.

Away from the food aisles, shop price inflation was just 0.2% having fallen from 1.3% in February. The BRC said electricals, clothing and footwear had all gone down in price thanks to “increased promotions” that were intended to draw in consumer spending.

BRC: 'the good news could be short-lived'

Reflecting on the findings, BRC chief executive Helen Dickinson said the good news for consumers could be short-lived.

She said: “Shop price inflation eased to the lowest level since December 2021 last month as retailers continued to compete fiercely to bring prices down for their customers. While Easter treats were more expensive than in previous years due to high global cocoa and sugar prices, retailers provided cracking deals on popular chocolates, which led to price falls compared to the previous month.

“While these figures are good news for consumers, from this month, retailers face significant increased cost pressures that could put progress on bringing down inflation at risk. These costs include a 6.7% business rates rise, ill-thought-out recycling proposals, and new border checks – all at the same time as the largest rise to the National Living Wage on record.”