Shop price inflation eases as food prices fall

The annual rate of price rises in UK shops has fallen to its lowest level in nearly two years.

Monthly data from the British Retail Consortium (BRC) and Nielsen IQ shows that shop price inflation eased to 2.5% in February 2024 — down from 2.9% in January, and the lowest since March 2022.

Price increases for food decelerated to 5.0% year-on-year in February, down from 6.1% in January, while non-food inflation was unchanged at 1.3%.

Between January and February of this year, food prices actually decreased as retailers passed on suppliers’ lower costs. Strong competition among supermarkets also helped to keep prices under control.

“Food prices fell month-on-month with drops in fresh food including meat, fish and fruit,” explained BRC chief executive Helen Dickinson. “This was driven by easing input costs for energy and fertiliser while retailers competed fiercely to keep prices down. In non-food, inflation for furniture, electricals and health & beauty products rose, but the price of clothing continued to fall as many retailers kept promotions in place to entice consumer spend.”

Dickinson noted that “significant uncertainties remain” amid rising geopolitical tensions as well as a major increase to business rates in April, based on last September’s high inflation rate.

“April’s rates rise should be based on April’s inflation, and the Chancellor should use the Spring Budget to make this correction, supporting business investment and helping to drive down prices for consumers,” she said.

The underlying trend in prices will be downwards over the next few months, added Mike Watkins, head of Retailer and Business Insight at NielsenIQ.

“Since the start of the year, food retailers in particular have reduced prices as well as passing on price cuts coming through supply chains. For high street retailers faced with weaker demand, keeping prices stable over the next few months will be key to encourage customers to spend.”