Shop prices "teetering on brink" of inflation, says BRC

The British Retail Consortium (BRC) has revealed that shop price deflation reached its lowest level in the last four years in September, with a fall of just 0.1% compared to 0.3% in August.

Its BRC Nielsen Shop Price Index showed that price deflation on non-food items accelerated to 1.5% in September, compared to 1.3% in August. However it is a marked slow-down in price deflation compared to September last year, when prices fell 2.1%. Food prices increased by 2.2% in September compared to an increase of 1.3% in August.

BRC chief executive Helen Dickinson said overall prices were now "teetering on the brink" of inflation. Food prices had been impacted by a number of factors including a global milk shortage, an increase in cereal prices and the fact we are now heading into a new season for fruit and vegetables which means enhanced exposure to the weak Sterling exchange rates on imports.

In non-food, including fashion, retailers have been attempting to shield consumers from rising prices by absorbing the additional costs which have resulted from the decline in value of Sterling since the Brexit vote. But Dickinson warned they may not be able to continue to do so for much longer.

"[...] retailers’ efforts to shield shoppers from the impact of higher import prices of basic non-food items are holding out for now. However, as more non-food retailers’ hedging facilities come to an end this autumn, and as public policy costs mushroom, consumers are likely start feeling an additional pinch on these products," she said.

“This more challenging outlook for consumers going forward is made more ominous by the recent uptick in producer price inflation - the first since February - which is adding further inflationary pressures on the horizon. Stretched family budgets will continue to feel the strain as increases in the price of the weekly shop add to overall rising inflation which continues to outpace wage growth," Dickinson added.

She also called upon the government to "reach a prompt agreement with the EU on the terms of a Brexit transition, to ensure [retailers] aren’t faced with a cliff edge scenario that could mean tariff-related price increases on top of those they are already paying."