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BRC and Nielsen warn on price rises in retail

Alice Ierace
29 May 2019

The British Retail Consortium (BRC) and Nielsen have just revealed that price rises in retail will remain inflated for a while.

Covering a period from 1st - 8th of May, they found out that:

  • Shop Price inflation accelerated in May to 0.8% from 0.4% in April. This is above the 12- and 6-month average price increases of 0.2% and 0.6%, respectively;
  • Non-Food prices increased in May by 0.2% compared to April when prices decreased by 0.6%. This is above the 12- and 6-month average price decline of 0.6% and 0.2%, respectively. This is the second month of non-food inflation in 2019, in contrast to the past six years of deflation;
  • Food inflation continued to decelerate in May to 1.8% from 2.2% in April. This is above the 12-month average price increase of 1.7%, but below the 6-month average price increase of 1.9%;
  • Fresh Food inflation was steady at 1.5% May. This is above the 12- and 6-month average price increases of 1.3% and 1.4%, respectively. Meat prices fell this month, in line with past global developments which are now feeding through into final consumer prices. On the other hand, downward pressures on dairy products are yet to be passed on to consumers;
  • Ambient Food inflation slowed to 2.1% in May down from 3.2% in April. This is below the 12- and 6-month average price increases of 2.3% and 2.4%, respectively;
  • The driver behind the May acceleration in Shop Price inflation was growth in Non-Food prices, caused by some sectors, such as Furniture and Health & Beauty, adjusting their prices to their 2015/ 2016 levels, following a couple of years of deep discounts. Case in point, May 2019 Furniture prices are higher by 6.5% on May 2018, but only higher by 0.5% on May 2015. However, weak consumer spend on discretionary items is likely to continue to keep a lid on any significant price increases. On the other hand, the deep deflation in Clothing and Electricals put downward pressure on Non-Food prices. 

Helen Dickinson OBE, Chief Executive, British Retail Consortium, commented: “Shop Price growth in May was the second highest rate in the last six years, though it remains well below headline inflation. The forces driving inflation continue to play out differently across the industry. The price rises in some Non-Food categories, such as Furniture and Health & Beauty, follow years of deep discounting, while other areas, such as Electrical and Clothing, have seen greater technological disruption and more intense competition, putting downwards pressures on prices. Food inflation continued to slow, though it remains above the 12-month average.

“Rising costs associated with currency depreciation, stockpiling, rising minimum wage and the Apprenticeship Levy, have all put upwards pressure on prices for a while, and it now appears that retailers cannot absorb them any longer. Unless the Government addresses future cost rises, including spiralling business rates, we may see larger price rises in the future.

Mike Watkins, Head of Retailer and Business Insight, Nielsen, added: "Whilst there are still cost price increases coming through the supply chain, food inflation remains lower than CPI and supermarkets continue to offer price reductions, in particular on seasonal food and drink, which is helping to offset other cost of living increases. Inflation has returned to non food but consumers remain cautious and there is intense competition on the high street. With non food retailers facing uncertain levels of demand, price discounting could quickly return if demand weakens over the next few months."

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