Retail price inflation slows to ‘lowest level since 2021’, British Retail Consortium finds

UK retail price inflation fell to its lowest level in almost three years last month, the British Retail Consortium (BRC) has found.

According to the trade body’s latest Shop Price Index, products cost just 0.2% more on average than they did in June 2023 - down from an annual rate of 0.6% in May. It means prices are growing at their slowest rate since October 2021 when the cost of living crisis was in its early stages.

However, food prices continued to rise at a higher rate than headline inflation, as measured through the Office for National Statistics Consumer Prices Index (CPI). The BRC’s figure of 2.5% suggests food is outpacing the headline CPI, which came in at 2% in May.

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

It comes as officials expect UK inflation to remain close to 2% over the coming months, with the next set of official ONS data due out in a fortnight. It means the rate of price hikes is on the Bank of England’s target, although sticky services and core inflation within the CPI data could delay interest rate cuts until the autumn. The base rate was held at 5.25% at June’s Monetary Policy Committee meeting.

Retail price inflation ‘decelerating rapidly’

The BRC’s figures, which were collected between 1 and 7 June 2024, showed annual inflation rates had tumbled significantly from the previous month’s data across food and non-food categories.

Food price hikes fell from 3.2% year-on-year in May to 2.5% in June. On a monthly basis, prices actually dropped 0.1%. The annual deceleration was led by fresh food, particularly butter, with chiller aisles seeing inflation tumble from 2% in May to 1.5% last month.

Ambient foods, such as cereals, confectionary and tinned goods, saw prices go up by an average of 3.9% in June compared to the same month last year. This was significantly lower than the annual rate of 4.8% that was recorded in May. Falling coffee prices were one of the key reasons for the slowdown, according to the BRC.

Away from food aisles, deflation - the rate of price falls - sped up. The cost of non-food items was an average of 1% down year-on-year, having been 0.8% lower in May. This came after prices fell 0.2% month-on-month. TVs were subject to some of the biggest discounting, the BRC said, as retailers sought to take advantage of the Euro 2024 football championship in Germany.

Mike Watkins, head of retailer and business insight at NielsenIQ - the data analytics firm that helps to compile the BRC Index - said slowing inflation would aid shoppers, as they would be better able to plan their household budgets. He added that “uncertainty around discretionary spending” meant price increases were likely to be kept low this summer amid “intense competition” amongst retailers.

BRC: slowing inflation down to ‘retailer investment’

Responding to the latest Shop Price Index findings, the BRC - which represents most of the major supermarkets and high street chains - said the improving inflation figures had come as a result of significant investment by its members.

Its chief executive, Helen Dickinson, said: “During the height of the cost of living crisis, retailers invested heavily in improving their operations and supply chains to compensate for the impact of global shocks on input costs. This is clearly paying off.”

She called on the winner of the next general election to better support her members. Dickinson added: “Whoever wins Thursday’s election will benefit from the work of retailers to cut their costs and prices, easing the cost of living for millions of households. The last few years should serve as a warning that where business costs rise significantly, consumer prices are forced up too.

“The next government must address some of the major cost burdens weighing down the retail industry, including the broken business rates system, and inflexible apprenticeship levy. By doing so, retailers can invest in lower prices for the future – helping to reduce the cost of living pressures that many families face.”