Shop prices are teetering on the edge of a return to inflation against a backdrop of higher import costs and a tightening squeeze on discretionary spending, new figures from the British Retail Consortium and Nielsen show.
For a third consecutive month, shop prices decreased at an annual rate of 0.1% in November, the shallowest deflation rate in the last four years.
Food inflation slowed to 1.5% in November from 2.2% in October, but it was bad news for the non-food category, with deflation easing to 1.1% from 1.5% in October, the lowest rate since May 2013.
BRC chief executive Helen Dickinson said: “For the third consecutive month shop price inflation remained static, still teetering on the edge of a return to inflationary territory. November now marks the 55th consecutive month of deflation with the current rate the shallowest in the last four years.
“While food inflation has fallen back in line with global prices, non- food deflation is as low as its been for more than three years, as hedging contracts come to an end and with them, retailers’ ability to shield their customers from the currency depreciation.
“Against a backdrop of higher import costs and a tightening squeeze on discretionary spending power, the challenges to the industry remain stark. So we will continue to press the Government to put business taxation on a more affordable and sustainable footing and to enable the industry to invest in the digital skills that are needed today and in the future.”
Mike Watkins, head of Retailer and Business Insight at Nielsen, commented: “Many inflationary increases are still being absorbed by retailers and are not being passed on to the consumer in the form of higher prices. Nevertheless, the deflation in non-food continues to overshadow the discounting and promotional activity taking place in this channel as consumers become more cautious and look for ways to save on their household bills.”