BRC – NIELSEN SHOP PRICE INDEX – August 2018

Period Covered: 06 - 10 August 2018

• For the first time in over five years, shop prices entered inflationary territory: in August, shop prices increased by 0.1%, up from the July decrease of 0.3%. This broke a deflation cycle of 63 months.
• Non-food deflation continued to ease in August to 1.0% from 1.4% in July. This is the lowest rate of deflation since April 2013.
• Food inflation accelerated to 1.9% in August from July’s rate of 1.6%.
• Fresh Food inflation picked up in August when prices increased by 1.5%, up from 1.2% in July.
• Ambient Food inflation accelerated to 2.5% in August from 2.2% in July.
• Both higher food price inflation and lower non-food price deflation contributed to the return of Shop Prices to inflation, after deflation last month. However, Shop Price inflation remains well below headline Consumer Price Inflation, the result of high levels of competition in the industry.
• Higher food inflation is 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.
• Lower Non-Food price deflation has been driven by a shift by a number of retailers in their approach to promotional activity, while strong demand for Summer products earlier in the season has reduced the need for discounting on these lines. However, this does not apply to all categories: Clothing remains the category showing the deepest deflation and is little changed from last month.

Helen Dickinson OBE, Chief Executive, British Retail Consortium:

“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. 

"The EU and UK negotiating teams must deliver a Withdrawal Agreement in the coming weeks to avoid the severe consequences that would result from such a cliff edge scenario next March."

Mike Watkins, Head of Retailer and Business Insight, Nielsen:

"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."