January sales see shop price deflation hit 0 .7%

January sales helped shop price deflation reach 0.7% in January, above deflation of 1.0% in the previous month, as retailers attempted to attract post-Christmas shoppers, according to the latest figures from the BRC-NilesenIQ Shop Price Index.

Shop price annual growth is at its lowest rate since August 2021 as non-food remained in deflation at -1.8% in January, edging up from -2.4% in the preceding month. This is slightly above the three-month average rate of -2.0%. Deflation is the most since July 2021.

Meanwhile, food inflation eased to 1.6% in January, down from 1.8% in the month preceding. This is below the three-month average rate of 1.8%. The annual rate has eased considerably since the start of 2024 and inflation remained at its lowest rate since November 2021.

Finally, fresh food inflation also slowed in January, to 0.9%, down from 1.2% in December 2024 and ambient food inflation edged down to 2.5% in January, from 2.8% in November – marking its lowest level since February 2022.

Helen Dickinson, chief executive of the BRC, said: “While overall prices fell in January, the pace of shop price deflation eased. Extensive January sales was good news for bargain hunters, with non-food products showing significant discounts, particularly for furniture and fashion, but less good news for retailers needing to shift excess stock. This month’s figures also showed early signs of what is to come, with month on month food prices rising at their fastest pace since April last year. Ambient food saw a 1% jump as prices spiked for sugary products, chocolates and alcohol.

“Price cuts and deflation may not last much longer as retailers will soon feel the full impact of £7bn of new costs announced at the last Budget. Higher employer NICs, increased National Living Wage, and a new packaging levy mean that prices are expected to rise across the board. Government can help to mitigate the impact on consumers by ensuring its proposed reforms to business rates do not result in any store paying more in rates than they already do. Without action, UK households will feel the effects.”

Mike Watkins, head of Retailer and Business Insight, NielsenIQ, added: “Shoppers continue to be unsure about spending and many are seeing a continued squeeze on their household incomes. So we expect non-food retailers to still promote and food retailers to still offer price cuts over the next few weeks, with shoppers managing their budgets by shopping smart and shopping around for wherever the savings are the most attractive.”