Shop prices see continued deflation in September; Food prices edge higher

Shop prices in the UK continued to fall in September, with deflation reaching 0.6 per cent, down from 0.3 per cent in August, according to the latest data from the British Retail Consortium (BRC).

This marks the lowest rate of shop price annual growth since August 2021, and is below the three-month average rate of -0.3 per cent.

Non-food items saw the steepest deflation, falling to -2.1 per cent in September, down from -1.5 per cent the previous month. This is also below the three-month average of -1.5 per cent, with inflation in this category now at its lowest level since March 2021. Clothing and furniture were the key drivers of this trend, as retailers applied significant discounts in an attempt to draw customers back into stores.

However, food inflation edged higher, rising to 2.3 per cent in September from 2.0 per cent in August, slightly above the three-month average of 2.2 per cent, as poor harvests in key producing regions led to higher prices for cooking oils and sugary products.

Fresh food prices experienced an uptick in inflation, climbing to 1.5 per cent from 1.0 per cent in the previous month, while ambient food inflation decelerated marginally, dipping to 3.3 per cent from 3.4 per cent in August.

“September was a good month for bargain hunters as big discounts and fierce competition pushed shop prices further into deflation. Shop price inflation is now at its lowest level in over three years, with monthly prices dropping in seven of the last nine months,” Helen Dickinson, chief executive of the BRC, commented.

While the ongoing price relief is welcome news for consumers, Dickinson warned that various external pressures, such as geopolitical tensions, climate change, and regulatory costs, could reverse the current trend.

“Retail faces a disproportionate tax burden compared to other industries and the government must take decisive action in the upcoming Budget and introduce a 20 per cent Retail Rates Corrector - a 20 per cent adjustment to bills for all retail properties - to level the playing field,” she said, adding that this will allow retailers to offer better prices, open more shops, protect jobs, and unlock investment.

Mike Watkins, head of retailer and business insight at NielsenIQ, echoed these sentiments, saying, “With non-food prices in deflation, this will help shoppers as they plan their household budgets for the rest of the year, and the slight increase in food inflation is indicative of shop price inflation stabilising closer to the long-term range. Even so, retailers will still need to focus on driving demand with attractive promotions over the next few weeks.”