Shop prices shrink at slowest rate in over three years

UK shop prices shrank at their slowest rate for over three years in March, as food price inflation accelerated to its sharpest rate since early 2014.

Overall shop prices were down 0.8% in March, which was the shallowest deflation rate since December 2013 according to the BRC-Nielsen shop price index, following a 1.0% fall in February. It means shop prices have been falling for 47 consecutive months.

Non-food deflation accelerated to 2.0% in March from the 1.8% fall in February, while food inflation accelerated to 1.0% in March, up from the 0.8% fall in January - the sharpest inflationary rise since February 2014.

Fresh food inflation rose to 0.9% from 0.1% a month before, while ambient food price rises accelerated to 1.3% from 0.8%.

With global food commodity costs up 17% on average since this time last year, substantial pressure is being exerted in the food supply chain, the British Retail Consortium said.

Said BRC chief executive Helen Dickinson: "Although UK food shop prices are seeing their steepest rise this month for over two years, the increase is still only one per cent, reflecting the continuing intense competition between retailers. The limited increase is even more impressive, given the magnitude of the devaluation in sterling.

She said the picture in non-food prices was also positive for consumers, with four years of non-food price deflation.

"Looking across both food and non-food, shop prices in total have been falling for 47 consecutive months. Other factors outside of retail shop prices continue to be the main drivers of CPI rising faster than expected, for the moment at least. The squeeze on household disposable incomes will tighten as the year progresses."

Mike Watkins, Nielsen's head of retailer and business insight, added that while inflation was gaining momentum across the economy, in food retailing, the cost price increases being passed onto shoppers in March was lower than the consumer price index and the non-food channel was still seeing deflation.

"We anticipate this trend to continue over the next few months. If so, this would be good news for shoppers managing household budgets when prices are rising faster elsewhere and with Easter falling later this year, it may help overall retail sales growths."