Shop Prices Fall for 1st Time in Almost 3 Years

A woman holds a shopping basket of groceries in Cardiff, Wales, on May 22, 2022. Matthew Horwood/Getty Images

Shop prices fell for the first time in nearly three years this month, as retailers offered heavy discounts on their summer stock of fashions and household goods.

The latest data from the British Retail Consortium (BRC) and NielsenIQ recorded shop price deflation of 0.3 percent, down from 0.2 percent in July.

Deflation occurs when the general price level for goods and services decreases and the inflation rate falls below 0 percent.

In August, the shop price annual growth was below the three-month average rate of 0 percent and remained at its lowest rate since October 2021.

BRC Chief Executive Helen Dickinson said that non-food deflation and heavy discounts on summer stock drove down shop prices in August.

“This discounting followed a difficult summer of trading caused by poor weather and the continued cost of living crunch impacting many families,” said Dickinson in a statement.

Prices

Consumers saw food prices ease by 2 percent with the lowest inflation since November 2021.

The cost of both fresh and ambient foods went down below the three-month average rates.

“Food inflation eased with fresh food prices, especially fruit, meat and fish, seeing the biggest monthly decrease since December 2020 as supplier input costs lessened,” Dickinson said.

Inflation in the non-food category recorded the lowest rate since July 2021. Prices remain in deflation at -1.5 percent, further down from -0.9 percent in the preceding month.

Dickinson said that families will be “happy” to see that prices of some products have fallen. Retailers are expected to continue “to work hard” to keep prices down, she added.

The BRC also pointed out the uncertainty in outlook for commodity prices. This is “due to the impact of climate change on harvests domestically and globally, as well as rising geopolitical tensions,” Dickinson said.

The UK could see “renewed inflationary pressures over the next year,” she warned.

Millions of Britons tuned into major sporting events this summer, including the UEFA Euro 2024 tournament, the Wimbledon tennis championships and the Olympic Games in Paris. To help “drive incremental sales during the ‘summer of sport’,” retailers introduced more price cuts in August.

Many non-food retailers have also kept promotional support owing to unpredictable weather, said head of retailer and business insight at NielsenIQ, Mike Watkins.

It comes against a backdrop of 2.2 percent inflation, recorded by the Office of National Statistics in July. It was the first increase this year after months of decline.

The Consumer Price Index inflation rose above the Bank of England’s (BoE’s) 2 percent target. The increase was driven by gas and electricity prices falling by less than they did last year.

Consumer Attitudes and Interest Rate

According to GfK’s Consumer Confidence Index that measures a range of consumer attitudes, expectations for the UK’s economy were down this month for the first time since February.

However, there was a three-point uptick in the Major Purchase Index, which indicates whether customers consider it to be the right time to make major purchases.

The jump is “great news” for retailers and shows that more shoppers agree that now is a good time to buy big-ticket items, said client strategy director at GfK, Joe Staton, in a statement.

Looking at their personal financial situation over the next 12 months, consumers have kept a positive outlook, according to GfK. This may be down to a “mortgage friendly interest rate cut at the beginning of August – and hopes of more to come,” said Staton.

The BoE lowered the interest rate from 5.25 to 5 percent on Aug. 1, in the first rate cut in more than four years.

The decision was welcomed by the trade association for independent retailers in the UK, BIRA.

BIRA believes the rate cut will provide “much-needed relief to independent retailers and consumers alike.” It will potentially stimulate spending and investment in the retail sector, the association said.