Retailers have led shop prices into deflation, marking the first occurrence in nearly three years.
- In August, shop prices dropped to 0.3% from the previous month’s inflation rate of 0.2%, according to BRC-NielsenIQ.
- Non-food items experienced significant deflation, dropping to -1.5% in August as retailers heavily discounted summer stock.
- Food inflation also eased slightly, slowing to 2.0% in August, with an ongoing downward trend.
- Retail experts express concerns about potential future inflation due to global challenges like climate change and geopolitical tensions.
Retail prices have entered deflation, reaching 0.3% in August, a reversal from an inflation rate of 0.2% in the prior month, marking the first deflation in almost three years. The recent data from the BRC-NielsenIQ Shop Price Index reveals these developments, indicating a significant shift in pricing dynamics driven by retailer strategies.
Non-food products, particularly in fashion and household goods, saw pronounced deflation. Retailers endeavoured to clear summer stock with aggressive discounting strategies, leading to a deflation rate of -1.5% for these items in August, down from -0.9% previously. This trend is noted as being below the average rate for the last three months, highlighting the extent of discounting following a challenging trading period characterized by poor weather conditions and financial pressures on households.
The food sector also demonstrated a decline in inflation rates, reaching 2.0% in August, slightly down from 2.3% observed in July. This easing in food inflation represents the lowest rate since November 2021, continuing a downward trajectory and aligning with broader pricing trends across the retail landscape.
Insights from industry leaders suggest an uncertain outlook. Helen Dickinson, CEO of the BRC, emphasized the impact of external factors such as climate change affecting harvests and rising geopolitical tensions, which could potentially lead to renewed inflationary pressures over the coming year. These global challenges may impact commodity prices, influencing future market conditions.
Mike Watkins of NielsenIQ noted that the reductions in shop price inflation were due to sustained promotional efforts by retailers, particularly in response to erratic weather conditions and an attempt to boost sales during significant events like the ‘summer of sport’. His insights align with the observed trends in non-food and food price adjustments.
The retail sector faces complex challenges as it navigates deflationary trends amid uncertain global conditions.
