Pressures on shop prices ease

February shop price deflation deepened to 0.8% in February 2018 compared 0.5% with the previous month.

According the British Retail Consortium deflation in non-food prices deepened in February, with prices decreasing at a rate of 2.2% compared to January when prices declined by 1.9%. This was the deepest deflation since April 2017.

Fresh food inflation also slowed significantly, and fresh food prices increased by 0.9% in February, below the January increase of 1.7%. This was the lowest inflation rate since September 2017.

Helen Dickinson, CEO British Retail Consortium, said: “Shop prices dipped deeper into deflation territory in February, with fresh food seeing the biggest reduction in the inflation rate. This is a further sign that we have passed the peak of the upward pressure on inflation caused by the fall in the pound in June 2016.

“This will ease the squeeze on consumer incomes over the coming year, but it’s likely to do little to lift the rate of growth in consumption. Earnings are still falling in real terms, despite wages increasing, and savings are unlikely to provide the same support to spending that they have over the last 18 months.”

Mike Watkins, head of retailer and business insight group Nielsen, added: “Food retailers continue to see sales growth and this is being supported by inflation, as the cost price of some food in particular ambient grocery has increased since the start of the year.

“However not all of the increases have been passed onto shoppers and we are now seeing food inflation beginning to peak. With structural changes in the non food retail landscape accelerating and consumers remaining cautious about discretionary spend, non food prices are still deflationary.”