Market News

Inflation in UK Shops Falls to Lowest Level in Nearly Two Years - BLOOMBERG

FEBRUARY 27, 2024

BY Marc Daniel DaviesBloomberg News

, Source: British Retail Consortium - NielsenIQ Shop Price Index

(Bloomberg) -- Inflation in UK stores slowed to the lowest level since March 2022, signaling further respite for households as retailers doubled down on promotions and passed on lower costs.

Overall shop prices rose 2.5% in February from a year ago, compared with a 2.9% annual increase the prior month, marking a ninth consecutive monthly decline, according to the British Retail Consortium. Easing supply-chain pressures, falling input costs for energy and fertilizers, and fierce competition between retailers were key drivers, BRC Chief Executive Officer Helen Dickinson said.

Grocery price inflation dropped to 5.3% according to separate figures published by research firm Kantar on Tuesday morning — a 1.5 percentage point fall from January. The data chimed with the BRC’s own figures on food inflation, which showed a sharp deceleration from 6.1% to 5%, and an even stepper drop for fresh foods including meat, fish and fruit.

“The underlying trend in prices will be downwards over the next few months,”said to Mike Watkins, NielsenIQ’s head of retail and business insight.

Read More: UK Grocery Inflation Falls to Lowest Level Since March 2022

The data add to evidence of a broader slowdown in inflation, which rose less than forecast in January, in tandem with signs the economy may have already emerged from a shallow recession. Heavy discounting aided a rebound in retail sales last month after a dire December, while a recent survey showed Britain’s private sector firms are the most optimistic in two years amid recovering real household incomes.

Red Sea

Still, inflation for some non-food goods including furniture and electrical appliances climbed last month and these items will be more susceptible to rising shipping costs due to geopolitical tensions in the Red Sea, Dickinson said. 

That echoes warnings from retail bosses in January about potential delays and higher costs as commercial vessels avoid the Suez Canal. Having to travel “the whole way around Africa to get to Europe” may drive up inflation, but “we just don’t know,” Tesco CEO Ken Murphy said last month.

The BRC said higher business rates — a property tax — and a rising minimum wage would push up costs. Small firms are getting relief from business rates, but many larger companies will face an increase from April.

British supermarkets’ most recent earnings revealed solid growth over the Christmas period, with price cuts and customer loyalty initiatives boosting sales.

(Updates with Kantar data in third paragraph.)


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