Shop deflation narrows as price pressures build

Shop prices edged closer to ending a four-year trend of deflation, in the latest sign of the increasing pressure on household finances.

Prices in shops were 0.3% lower in June than in the same month last year, according to the British Retail Consortium-Nielsen shop price index.

That compared to 0.4% deflation in May and was the shallowest rate of deflation since November 2013.

Food prices were higher, up 1.4%, but the headline figure was pulled into deflation by the impact of non-food, down 1.4% year-on-year.

The BRC-Nielsen index has seen overall shop prices in a four-year trend of deflation.

But a big fall in the value of the pound – which makes imported goods more costly – coupled with higher commodity prices has put upward pressure on price tags.

BRC chief executive Helen Dickinson said: “The reality is that cost pressures faced by retailers continue to mount.

“There is a limit to the ability of retailers to protect consumers by absorbing these impacts into their margins – as a result further price increases are inevitable

“With that in mind and with the UK’s trading relationships under discussion, it’s of the utmost importance that the Government does all it can to limit any further cost increases that could further adversely impact the finance of the UK’s consumers.”

The BRC acknowledged that prices had in fact already been rising for the past six months, despite its headline inflation figure remaining negative.

That was because the year-on-year number was still affected by big price falls seen in late 2016.

The shop price index is a narrower measure than the official inflation data that covers a range of goods and services.

Consumer Price Index (CPI) inflation, as measured by the Office for National Statistics (ONS), rose to a near four-year high of 2.9% in May.

At the same time, wage growth has been stuttering.

ONS figures last week showed real terms household disposable incomes were in their longest decline since the 1970s.


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