Shop prices rise continue to rise, putting pressure on consumers

Prices on the high street have risen for the second month on a row, as a lengthy period of price deflation comes to an end.

The BRC-Nielsen Shop Price Index showed that overall shop price inflation was 0.2% in September, up on August’s 0.1% and the second consecutive month of increases.

Non-food price deflation was -0.9%, easing from August’s -1.0%. The clothing sector had the lowest level of deflation since November 2017, as the focus shifted to new autumn ranges and full price sales.

Food inflation was steady at 1.9% last month, while fresh food inflation increased to 1.6% from 1.5% in August. Ambient food inflation slowed to 2.4% from 2.5% in August.

Helen Dickinson, chief executive of the British Retail Consortium, warned that after five years of deflation, further price increases were likely.

“Global commodity conditions, in particular oil prices, would indicate that there are likely to be further inflationary pressures in the sort to medium term which could lead to further price rises,” she argued.

“This would be worrying enough for hard-pressed British consumers if we weren’t staring down the barrel of a no-deal Brexit. Food prices alone have now been inflationary for more than a year and the BRC estimates that consumers could face up to a 29% increase in prices of products such as beef in the event of a no-deal.

“This is not good news for UK shoppers, who out of all the stakeholders in the Brexit process ultimately have to the most to lose.”

Mike Watkins, head of retailer and business insight at Nielsen, noted: “Despite the return of wage growth across the economy, there continues to be pressure on the consumer wallet, in particular from higher energy and travel costs. The good news for shoppers is that shop price inflation continues to lag the consumer price index.”

Greg Lawless, analyst at Shore Capital, said: “In our view, food inflation remains manageable for consumers. UK living standards continue to rise, albeit modestly. The recent rise in the price of oil – now touching $85 a barrel – is starting to be felt at the forecourt which continues to put further pressures on disposal income.”

He added: “Despite the ongoing uncertainly from the prolonged Brexit negotiations, UK consumers continue to be cautious but resilient and to get on with their lives.”