UK Shop prices drop at fastest rate in 14 years

By guest author Elias Jahshan from Retail Gazette

  • BRC-Nielsen Shop Price Index for May sees prices drop 2.4% in May, following a 1.7% decline in April
  • This is the biggest monthly drop since 2006
  • Non-food slides 4.6 % in May while food inflation also slowed down, easing to a 1.5 % uptick

Shoppers saw the price of goods endure their biggest monthly drop since 2006, according to the latest data. The BRC-Nielsen Shop Price Index revealed that prices slid by 2.4 per cent in May, following a 1.7 per cent decline in April.

Experts said the fall in prices was driven by non-essential retailers, who were forced to shut their doors in March due to the coronavirus pandemic.

Clothing and furniture retailers in particular offered heavy discounts in an effort to attract shoppers online and offset the impact of coronavirus.

“Shop prices in May fell at their fastest rate since 2006, which was largely driven by the drop in non-food prices,” BRC chief executive Helen Dickinson said.

“Clothing and furniture saw the biggest drop as retailers ran promotions to encourage consumer spending and attempted to mitigate recent losses.”

Non-food retailers saw prices slide by 4.6 per cent in May – the sharpest decline since December 2006 – compared to a decline of 3.7 % in April.

Meanwhile, food inflation also slowed down, easing to a 1.5 % increase from 1.8 % in April.

Fresh food prices also moved marginally higher, with inflation slowing to 0.5 % from one per cent in the previous month.

“Year-on-year food prices increased slightly due to higher business costs, implementing social distancing measures and the upward pressure from labour shortages, but were down on the previous month as more home-grown produce became available,” Dickinson said.

“We expect to see continued upward pressure on food prices from the effects of the pandemic in the coming months, while non-food prices are likely to remain deflationary with subdued sales.”

Nielsen head of retailer insight Mike Watkins said: “With the retail industry coping with store closures and social distancing limitations, it’s no surprise to see shop price inflation slowing in recent weeks.

“Across the major supermarkets with sales growths in high single digits in May, the consumer spend on promotions has also been at an all-time low, but there has been little upwards pressure on prices.

“However, as we move towards summer with the importance of seasonal foods and with the supply chain still disrupted, we can anticipate some volatility in prices.”