Shop prices continue moving into deflation in September

Shop prices continued to move into deflation in September, with a year-on-year decline of 0.6%, according to the British Retail Consortium-NielsenIQ Shop Price Index on Tuesday.

That marked a further fall from the 0.3% deflation recorded in August, and was below the three-month average of -0.3%.

The latest figures indicated the sharpest drop in shop prices since August 2021.

Non-food items saw the most significant deflation, with prices dropping 2.1% year-on-year, accelerating from the 1.5% deflation in August.

The category had now recorded its lowest inflation rate since March 2021, as consumer demand for non-essential goods remained subdued.

The three-month average for non-food inflation stood at -1.5%.

In contrast, food inflation edged higher in September, rising to 2.3% from 2% in the prior month, above the three-month average of 2.2%.

Although food inflation remained elevated, the annual rate eased, maintaining its lowest level since November 2021.

Fresh food prices, in particular, saw a sharper increase, with inflation climbing to 1.5% in September, up from 1% in August.

Ambient food prices, however, saw a slight deceleration in inflation, with prices rising by 3.3% in September, down from 3.4% in August.

That marked the lowest rate of inflation for ambient food since March 2022, and is below the three-month average of 3.4%.

“September was a good month for bargain hunters as big discounts and fierce competition pushed shop prices further into deflation,” said Helen Dickinson, chief executive of the British Retail Consortium.

“Shop price inflation is now at its lowest level in over three years, with monthly prices dropping in seven of the last nine months.

“This was driven by non-food, with furniture and clothing showing the biggest drops in inflation as retailers tried to entice shoppers back.”

Dickinson added that food inflation edged up slightly, as poor harvests in key producing regions led to higher prices for cooking oils and sugary products.

“Easing price inflation will certainly be welcomed by consumers, but ongoing geopolitical tensions, climate change, and government-imposed regulatory costs could all reverse this trend.

“Retail faces a disproportionate tax burden compared to other industries and the government must take decisive action in the upcoming Budget and introduce a 20% retail rates corrector - a 20% adjustment to bills for all retail properties - to level the playing field.

“This will allow retailers to continue to offer the best possible prices to their customers while opening shops, protecting jobs and unlocking investment.”

Mike Watkins, head of retail and business insight at NielsenIQ, noted that non-food prices in deflation would help shoppers as they planned their household budgets for the rest of the year.

“The slight increase in food inflation is indicative of shop price inflation stabilising closer to the long-term range,” he said.

“Even so, retailers will still need to focus on driving demand with attractive promotions over the next few weeks.”

Reporting by Josh White for Sharecast.com.