Shop price deflation comes to an end in August

Shop prices entered inflationary territory in August for the first time in over five years, with prices increasing by 0.1% compared with the 0.3% decrease in July.
Non-food deflation continued to ease in August to 1% from 1.4% in July, the lowest rate of deflation since April 2013, and food inflation increased to 1.9% in August compared with July’s rate of 1.6%.

Both higher food price inflation and lower non-food price deflation contributed to the return of shop prices inflation. The higher food inflation was the result of both the spell of hot, dry, weather this summer, which reduced yields of some foods produced in the UK, and the increases in the prices of oil and agricultural products on global markets earlier in the year.

Helen Dickinson CEO of the British Retail Consortium, said: “Despite significant increases in costs in the supply chain, this month’s figures show that retailers are keeping price increases faced by consumers to a minimum.

“However, current inflationary pressures pale in comparison to potential increases in costs retailers will face in the event the we leave the EU without a deal. If that does happen retailers will not be able to shield consumers from price increases.”

Mike Watkins, head of retailer and business insight at Nielsen, added: “With the recent hot summer weather, shoppers have been visiting food stores more often and purchasing more food and drink, with promotional offers helping to limit the impact of some cost increases coming through the supply chain.

“So it’s of no surprise that shop price inflation is a little higher this month. The challenges for the high street are different with less opportunity to stimulate demand. However, compared to the recent increase seen in the CPI, there is still limited inflationary pressure coming from retail at the moment.”

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