Shop price annual inflation in the UK decreased to 0.2% in June.
- The latest figure marks a decline from 0.6% recorded in May.
- Non-food items continued to experience deflation, standing at -1% in June.
- UK inflation aligned with the Bank of England’s 2% target, the first occurrence in nearly three years.
- Retailers’ supply chain investments contributed to lower inflation and reduced costs.
The BRC-NielsenIQ Shop Price Index has reported a significant decrease in shop price annual inflation, reaching 0.2% in June. This figure shows a marked reduction from the 0.6% observed in May and is considerably below the three-month average rate of 0.5%. This decline takes shop price growth to its lowest level since October 2021.
In the non-food sector, deflation persisted, with prices dropping further to -1% in June, compared to -0.8% in the previous month. This level of deflation is also below the average rate witnessed over the past three months. It highlights the ongoing efforts by retailers to drive sales through strategic discounting, especially in products like televisions, which saw significant price cuts amidst the popularity of the Euros.
Coinciding with these trends, the UK’s inflation rate has managed to return to the Bank of England’s target of 2% for the first time in almost three years. This convergence of targets indicates a stabilisation in the overall economic landscape, providing some relief against the rising cost of living.
Helen Dickinson, chief executive of the BRC, attributed this positive development to the heavy investments made by retailers in enhancing their operational efficiency and supply chain mechanisms. During the peak of the cost of living crisis, these strategic investments were essential to offset the impacts of global disruptions on input costs. Dickinson noted that this has “clearly paid off, with shop prices having risen just 0.2% over the past 12 months.”
Moreover, the food sector has benefited from falling prices for key consumer staples, including butter and coffee, leading to the lowest level of food inflation since 2021. This trend is indicative of the successful negotiations and cost management strategies employed by retailers.
The efforts by retailers have not only eased inflationary pressures but also stand to benefit whoever wins the upcoming election. This progress underscores the importance of addressing other significant cost burdens affecting the retail industry, such as business rates and the apprenticeship levy, to maintain and further these price reductions.
The concerted efforts by retailers to enhance supply chains and reduce costs have markedly lowered shop price inflation, reversing trends to benefit consumers.
