The UK’s retail prices dropped by 0.6% last month, the biggest drop in over three years. Non-food items saw significant drops, while food costs rose slightly.
The BRC-NielsenIQ Index shows that this deflation has accelerated since August’s 0.3% decline. This is due to large discounts, and fierce competition between retailers.
Food inflation has increased due to the poor harvests. This is a result of rising costs for essential ingredients such as cooking oil and sugar.
Prices of non-food items drop sharply since March 2021
In September, the non-food deflation rate reached 2,1%. Prices fell more than 1.5% in August.
It was the fastest rate of deflation seen since March 2021. Furniture, clothing and non-food products were heavily discounted by retailers to entice shoppers in the face of fierce competition.
Retailers are under increasing pressure due to economic issues and changes in consumer habits.
BRC reports that retailers have been heavily discounting in multiple industries, contributing to the acceleration of deflation for non-food products.
The price reductions in clothing and furniture were intended to stimulate a market that was relatively slow.
In September, food inflation rose to 2.3%.
Food prices rose in September from August’s 2.0% to 2.3%.
The increase in prices was due to the poor harvests of key agricultural areas, which resulted in higher prices for sugar and cooking oil, as well as products that contain these ingredients.
Food inflation remains above the average three-month rate of 2,2% but continues to be at its lowest level since November 2021.
In particular, fresh food inflation accelerated from 1.0% to 1.5 % in September, driven by challenges in the supply chain and higher input costs.
The inflation rate for ambient foods has decreased to 3,3% from 3,4% in August. This is a relief to consumers of these food categories.
Geopolitical factors and regulations could cause a reversal of the deflation trend
Although the general trend towards lower prices in shops may be welcome by customers, experts warn that it could only last a short time.
Helen Dickinson, BRC’s chief executive officer, highlighted several factors which could reverse the ease in shop prices.
Geopolitical tensions that persist, climate changes, and government-imposed regulatory costs could all lead to retailers incurring higher costs, leading to future price increases.
Budget 2019: Retailers call for a relief
Retailers are pushing policy changes ahead of the UK Budget scheduled to be announced later this month.
Dickinson, who is a member of the Conservative Party in England and Wales, called for Chancellor Rachel Reeves’s introduction of a 20% rate adjustment on all retail property bills. She argued that retail faces an disproportionately high tax burden when compared with other industries.
This adjustment, she believes, could level the playing fields, protect jobs and encourage investment.
Clive Black and other analysts suggested that recent trends in deflation could be a comfort to the Bank of England, as they navigate monetary policy within a volatile economy.
Black said that October could be a more quiet month for the retail industry as consumers and businesses alike wait to hear the news from the highly anticipated Reeves Budget.
The post UK Shop Prices Fall 0.6% In September As Non-Food Prices See Sharpest Deflation In 3 Years may be updated as new information is released.
