Retail prices in the UK have decreased by 0.3% in August compared to the previous year, marking the first decline in nearly three years.
- This decrease follows significant discounting by non-food retailers, who faced challenges such as poor weather and the cost of living crisis.
- Non-food retail prices saw a substantial drop of 1.5%, the lowest since July 2021, as stores sought to clear summer stock.
- Food price inflation eased, with fresh food prices seeing the most notable decrease, reaching a low not observed since December 2020.
- However, concerns remain due to potential inflationary pressures from climate change and geopolitical tensions.
According to data from the British Retail Consortium (BRC) and NielsenIQ, retail prices fell by 0.3% in August, a reversal from the 0.2% inflation recorded in July. This represents the lowest rate of retail price change since October 2021. Helen Dickinson, Chief Executive of the BRC, attributed this decline to significant discounts by non-food retailers, impacted by poor weather and the ongoing cost of living crisis.
Non-food retail prices decreased by 1.5% year-on-year. This marked the lowest rate since July 2021, revealing that retailers have been aggressively discounting to move unsold summer merchandise. This downward trend in pricing aimed to attract consumers during a season impacted by unexpected economic challenges and inclement weather.
Meanwhile, the food sector also experienced a moderation in price rises. Annual food price inflation eased to 2% in August from 2.3% in July. Fresh food prices, in particular, showed the most significant slowdown, with inflation falling to 1%, the lowest since December 2020. This was influenced by a reduction in supplier input costs. On the other hand, inflation in ambient food items, which are storable at room temperature, slipped slightly to 3.4% from 3.6%.
Despite these reductions in retail prices, Dickinson advised caution regarding future inflationary pressures. She noted the potential impact of climate change on global harvests and the risks posed by rising geopolitical tensions, which could rekindle inflationary challenges in the coming year.
The Office for National Statistics (ONS) reported an increase in retail sales in July, driven by heightened discounting and spending in department and sports equipment stores. This followed a period of weak sales due to poor weather. The volume of goods purchased rose by 0.5% from June to July, rebounding from a 0.9% decline the previous month. Sales in department stores grew by 4%, while sports equipment stores saw a 3.5% rise. However, sales at clothing and household goods stores dropped by 0.6%, and fuel sales fell by 1.9% despite lower prices at the pump.
Overall, although the quantity of goods purchased last month remains 0.8% below pre-pandemic levels, there has been a 19% increase in household spending since February 2020. This reflects the persistent impact of high inflation on consumer purchasing power and behaviour.
The recent decline in retail prices offers temporary relief, but potential future inflationary pressures warrant continued vigilance.
