Food prices likely to increase amid coronavirus crisis
In the first week of May, shop prices fell 2.4%, higher than the 1.7% recorded in April and the highest rate of decline since the British Retail Consortium (BRC) started capturing the data in December 2006.
Non-food prices fell 4.6% – again setting a new record as part of the data series.
And while food inflation eased to 1.5% in May, down from 1.8% recorded in the previous month, it’s likely food prices will increase due to the effects of coronavirus.
Helen Dickinson, chief executive of the British Retail Consortium, said: “Shop prices in May fell at their fastest rate since 2006, which was largely driven by the drop in non-food prices. Clothing and furniture saw the biggest drop as retailers ran promotions to encourage consumer spending and attempted to mitigate recent losses.
“Year-on-year food prices increased slightly due to higher business costs, implementing social distancing measures and the upward pressure from labour shortages, but were down on the previous month as more home-grown produce became available.
“We expect to see continued upward pressure on food prices from the effects of the pandemic in the coming months, while non-food prices are likely to remain deflationary with subdued sales.”
Dickinson added that while non-essential shops begin to reopen from 15 June, consumer demand is expected to remain weak and many retailers will have to fight to survive, especially with the added costs of social distancing measures.
“Retailers face an uphill battle to continue to provide their customers with high quality and great value products despite mounting costs. Government support remains essential, both to rebuild consumer confidence and to support the thousands of firms and millions of jobs that rely on it,” she said.
Mike Watkins, head of retailer and business insight at Nielsen, said: “With the retail industry coping with store closures and social distancing limitations, it’s no surprise to see shop price inflation slowing in recent weeks.
“Across the major supermarkets with sales growths in high single digits in May, the consumer spend on promotions has also been at an all-time low, but there has been little upwards pressure on prices.
“However, as we move towards summer with the importance of seasonal foods and with the supply chain still disrupted, we can anticipate some volatility in prices.”