British retailers are witnessing price deflation for the first time in nearly three years, with a recorded drop to 0.3% in August.
- Non-food goods saw significant deflation, decreasing to -1.5% due to substantial summer discounts.
- Food inflation also eased off, dipping to 2.0% in August, continuing a downward trend from previous months.
- This deflation comes amidst a challenging summer trading period marked by poor weather and economic pressures on consumers.
- Retailers anticipate potential inflationary pressures due to climate change and geopolitical events.
British retailers have experienced deflation for the first time in nearly three years, as shop prices fell to 0.3% in August, following a minor inflation rate of 0.2% in July. The data from the BRC-NielsenIQ Shop Price Index highlights a significant shift, as the annual growth rate remains the lowest since October 2021.
Non-food items have been a major driver of this deflation, with prices dropping to -1.5% in August, further down from -0.9% in the previous month. Retailers heavily discounted summer stock, including clothing and household goods, to attract buyers, especially after a challenging summer with lacklustre trading conditions due to adverse weather and ongoing financial strains on families.
Food inflation also saw a decline, decreasing to 2.0% in August from 2.3% in July. This marks the lowest food inflation rate since November 2021, easing consumer pressures slightly. However, the annual rate is still not improving swiftly, reflecting broader economic challenges.
Helen Dickinson, CEO of the British Retail Consortium, remarked on the situation, ‘Shop prices fell into deflation for the first time in nearly three years. This was driven by non-food deflation, with retailers discounting heavily to shift their summer stock, particularly for fashion and household goods.’
Mike Watkins from NielsenIQ noted that non-food retailers maintained promotions due to unpredictable weather, while food retailers introduced price cuts to boost sales during the ‘summer of sport’.
Retailers are cautious about future pricing as factors like climate change impacting harvests, along with rising geopolitical tensions, pose risks of potentially driving inflation again.
Retailers remain vigilant as uncertainties in climate and global politics could prompt inflationary challenges.
