Respite for consumers as shop prices continue to fall
Figures from the British Retail Consortium and Nielsen show shop price deflation deepened to 1% in March from 0.8% in February.
The biggest factor in the figures was a significant slow-down in food inflation. Inflation slowed from 1.6% in February to 0.4% in March. Deflation in non-food prices eased in March, with prices decreasing at a rate of 1.9% compared to February when prices declined by 2.2%.
Fresh food inflation slowed to the lowest rate since March 2017. Prices increased by 0.3% in March on the same month last year, compared to 0.9% in February. The so-called ‘ambient’ food inflation (shelf food) rate was lower in March; prices increased by 0.6% in March on the previous year, while in February inflation stood at 2.5%.
This shows a different picture to the consumer price index, which includes other living expenses such as fuel. This showed a rise of 2.5% for February 2018, although is expected to slow in March.
Helen Dickinson, chief executive of the British Retail Consortium, said: “Shop price deflation accelerated in March, driven by a substantial slowdown in food inflation, which reached its lowest rate for a year. As the impact of the pound’s depreciation one year on are beginning to fizzle out, retailers are passing the positive impact through to the shop floor.
“So some welcome respite for consumers, particularly with the gap between inflation and wage growth finally narrowing. But with further wage increases on the horizon putting upward pressure on prices, consumers will continue to feel the grip on their spending power.”
Mike Watkins, head of retailer and business insight at Nielsen, said: “Consumers are still coping with falling disposable incomes and non-food retailers are having to keep price increases to a minimum or make further price cuts, as consumer demand has been weak since the start of the year.
“With inflationary pressure receding in the food supply chain, we can now expect supermarkets to focus on lowering prices and to use promotions to drive visits as part of the battle for gaining share of wallet. With 27% of the value of the shopping basket being discounted by offers or short-term price cuts, which is a 10-year low, shoppers will take advantage of any increase in discounting as they seek out the best value for money.”