Food price decline continues in boost to shoppers, says BRN-Nielsen index

Shop prices continued to fall in June as food prices sank further in a boost to consumers, according to the BRC-Nielsen shop price index.

Overall shop prices fell 2% in June, declining further from a 1.8% decline in May, which is lower than the 12-month average of -1.8%.

Food prices deflated further in June falling to 0.8% from 0.3% in May. Fresh food prices fell at an accelerated rate to 1.5% from 0.8% in May, which the deepest deflation rate since September according to Nielsen.

However, ambient food inflation slowed to 0.1% in June form 0.4% in May.

There was a slight fall in non-food deflation as it fell to 2.8% in June from 2.7% in May.

“This extraordinary 38-month run of deflation has undoubtedly been good for consumers,” said British Retail Consortium (BRC) chief executive Helen Dickinson. “While it has been driven largely by falling prices for non-food items we have, from time-to-time, seen food in deflationary territory as well – which provides the real boon for household budgets. June was one of those months with food prices falling by 0.8 per cent, the deepest deflation in food for over a year.”

However, Dickinson warned that prices in stores would eventually rise again as it will take time for any price increases to make a reappearance. She said it will depend on several factors including the future value of the pound, commodity prices and the impact of Brexit on input costs.

She added: “There won’t be any instant shocks as any changes will take time to feed through. Continuing fierce competition also means that putting up prices may not be viable for some retailers. For now and for the short term at least, the good news for consumers is set to continue.”

Head of retailer and business insight at Nielsen, Mike Watkins said: “Whilst changes in the economic landscape are anticipated next year, the current focus for the industry is the continued deflationary environment.

“This is good news for shoppers who benefit from falling prices but is added pressure for retailers as they balance increased costs from the national living wage and investment in multi-channel, with volatile consumer demand. A return to inflation is not expected just yet so it`s business as usual over the summer months and encouraging shoppers to keep spending is the priority.”