UK store costs fall for first time in virtually three years

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UK store costs have entered deflation for the primary time in virtually three years as retailers discounted summer season inventory on the again of poor gross sales and dangerous climate, in a lift to households after an extended interval of excessive worth rises.

The British Retail Consortium mentioned on Tuesday that store costs fell by an annual price of 0.3 per cent in August, down from a 0.2 per cent rise in July, marking the primary deflation since October 2021.

The trade physique’s store worth index, which offers an early indication of pricing pressures forward of official information on September 18, suggests the slowing in prices progress seen because the begin of this yr will proceed in the summertime.

BRC chief govt Helen Dickinson mentioned: “Households will be happy to see that prices of some goods have fallen into deflation.”

She mentioned the development had been pushed by non-food prices declining additional, with retailers discounting closely to shift summer season inventory, notably in style and family items

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

The BRC figures counsel the Workplace for Nationwide Statistics measure of meals worth inflation, which will likely be revealed subsequent month, will proceed to ease after coming in at 1.5 per cent in July.

That studying was unchanged from June and down from a 45-year excessive of 19.2 per cent in March 2023. Meals costs have risen sharply since wholesale vitality and commodities prices surged within the wake of Russia’s full-scale invasion of Ukraine.

Official UK CPI inflation, which not like BRC information contains providers and housing prices, rose lower than anticipated to 2.2 per cent in July after hitting the Financial institution of England’s goal of two per cent within the earlier two months. CPI hit a 41-year excessive of 11.1 per cent in October 2022.

With worth pressures softening, the BoE minimize rates of interest by 0.25 share factors to five per cent in August, the primary discount within the benchmark price in 4 years. Monetary markets anticipate one other price minimize in November.

The BRC mentioned non-food costs fell by an annual price of 1.5 per cent in August, larger than the 0.9 per cent decline in July.  

Annual meals inflation slowed to 2 per cent in August from 2.3 per cent in July, the bottom studying since November 2021. The development was pushed by the recent meals class, the place inflation slowed to 1 per cent in August from 1.4 per cent within the earlier month.

Dickinson mentioned worth pressures for fruit, meat, and fish eased as provider enter prices fell. However she warned that the outlook for commodity costs was “uncertain” due to the impression of local weather change on harvests domestically and globally, and rising geopolitical tensions.

“As a result, we could see renewed inflationary pressures over the next year.”