BRC-Nielsen: Shop Price Inflation Reaches Six-Year High

Data from the British Retail Consortium and Nielsen shows that shop price inflation accelerated to 0.7% in February, up from 0.4% in January. This is the highest inflation rate since March 2013.

• Non-Food prices rose by 0.2% year on year in February compared to the January decrease of -0.2%. This is the first time that Non-Food have been inflationary since March 2013.
  
  
• Food inflation inched up slightly in February to 1.6%, up from 1.5% in January.
  
  
• Fresh Food inflation accelerated to 1.7% in February, up from 1.2% in January. This is the highest rate since January 2018.
  
  
• Ambient Food inflation eased in February to 1.5%, down from 1.9% in January. This is the lowest inflation rate since May 2018.
  
  
• The key driver of the upward movement in year on year Shop Price Inflation in February was Non-Food, while Food price inflation overall was broadly stable.
  
  
• February is usually a month when Non-Food retailers introduce new products at full price, after a January of clearing stock and deep discounting. Therefore, it’s no surprise that Non-Food prices are higher month on month. In contrast, Non-Food prices are higher year on year for the first time in six years. This reflects the ongoing slow release of significant cost pressures which have built up in the supply chain over the last two years, notably from the currency depreciation in 2016 and the rise in oil prices last year.
  
  
• However, Non-Food prices remain below levels seen in 2016. And, given weak discretionary spending and intense competition, it is likely that heavy discounting will be back.

Helen Dickinson OBE, Chief Executive, British Retail Consortium:

“For the first time in almost six years the price of non-food goods rose, albeit slowly, as cost pressures which had been building in the supply chain over the past few years fed through into prices. This adds to gradual ongoing rises in food prices, resulting in the highest overall shop price inflation since March 2013.

“While price rises over the last six months have been relatively modest, a no deal Brexit would have a much more immediate and dramatic effect. If this happens, prices of both food and non-food would rise as a result of any new tariffs, the cost impact of any delays at borders, increased administration, and the likely currency depreciation. Parliament must protect British consumers by agreeing a solution that avoids a chaotic no deal Brexit.”

Mike Watkins, Head of Retailer and Business Insight, Nielsen:

"Whilst shop prices have moved upwards slightly in February, economic growth is slowing and there is still weak retail growth. So, for as long as shoppers continue to be cautious, it will be difficult for the industry to pass on in full any cost price increases coming through the supply chain, particularly as around half of households are still reluctant to spend and many have concerns about the economy. Retailers will need to simplify the shopper experience, improve customer engagement and deliver good value for money to encourage shoppers to spend."   

Comment

Business growth expert and Yomdel CEO, Andy Soloman, commented:

“The latest hike in the price of goods was inevitable considering the heavy level of discounting that retailers have deployed consistently for almost five years now.

Something had to give and despite existing competition and wavering levels of consumer sentiment, it was only a matter of time before the UK retail sector was forced to play a hand with one eye on our European departure.

These staggered increases should allow retailers to better protect themselves ahead of what is likely to be a shambolic Brexit process – and who can blame them.

We expect, like many areas of the economy, the retail sector will brace for the worst, however, once a greater air of stability returns we should see the price of goods start to fall once again.” 

Source : Insight DIY Team and BRC-Nielsen

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