Retail price deflation eases in March, BRC-Neilsen data shows

Retail prices fell 1.7% in March, completing three years of deflation as retailers wage war on the pricing front, but easing off from the fall the month before.

The BRC-Nielsen Shop Price Index improved from the 2.0% fall in February thank in particular to a slowing in non-food deflations.

Non-food prices fell 2.6% in March, less than the 3.0% fall in February and the two previous months, while food deflation remained flat at 0.4%.

The index recorded the strongest non-food deflation in clothing and footwear, of 6.8%, while electricals prices fell 2.5% and DIY 2.4%, though modest inflation was recorded in books, stationary and home entertainment.

Fresh food deflation remained at 0.9%, driven by oils and fats, fruit, milk, cheese and eggs; while inflation in ambient food such as breads & cereals and alcoholic beverages rose to 0.4% in March from 0.3% in February.

On Tuesday, Kantar recorded year-on-year food deflation at UK supermarkets of 1.5%.

Mike Watkins, head of retailer and business insight at Nielsen, said shoppers were still making changes to how they spend to stay within their household budget, including looking out for price cuts and promotions.

"So with shop prices continuing to be lower than a year ago this is good news for shoppers," he said.

"With spring arriving, retailers will be hoping that this drives store traffic as so far this year, retail sales have been rather unpredictable.”

Helen Dickinson, chief executive of the British Retail Consortium, added: “Despite consumer confidence remaining at zero, a relatively benign economic environment and a fiercely competitive market will see retailers continue to respond to their customers with prices and promotions to maintain market share as the spring season kicks off.”

Also looking forward, analyst Clive Black at Shore Capital said he saw more upward than downward pressures for UK consumer markets, though it was too early to call northern hemisphere food harvests.

"At a macro level sterling has been weaker against key currencies in recent times, so there is scope to import inflation, whilst oil prices have tickled up from their recent lows. Looking 12 months ahead it is difficult to envisage much weaker crude prices and with sterling weakness we are already seeing higher on the ground pump prices in the UK."

Black also wondered whether the new 'national living wage' would filter through into higher consumer prices, particularly in the retail and hotel-restaurant-café spaces where relatively low paid labour is highly prevalent.

"Indeed, we see the NLW as a potential re-pricing of labour, perhaps leading to greater automation, that could have ongoing implications for the wider labour process. Accordingly, combined, we foresee stronger inflationary forces from a CPI perspective."