International Finance

Deflation in the UK deepens amidst challenging market conditions

UK, economy, UK economy, British Retail Consortium, inflation, deflation, retail, food
"Overall shop prices fell again in May as the impact of the pound's fall following the EU referendum reduces," said Helen Dickinson OBE, Chief Executive, British Retail Consortium

The shop prices in the UK fell by 1.1% in May 2018 compared to the same month last year. This is the 61st month of falling shop prices and the deepest deflation since January 2017.

Last month, deflation in non-food prices deepened further, with prices 2.5% lower than the same month in 2017. This is the deepest deflation in non-food since August 2016. Food inflation picked up in May to 1.2%, from 1.0% in April. Ambient food inflation also accelerated in May to 1.7%, from 1.2% in April. Fresh food inflation remained unchanged at 0.9% last month.

Helen Dickinson OBE, Chief Executive, British Retail Consortium, said:“Overall shop prices fell again in May as the impact of the pound’s fall following the EU referendum reduces and the challenging retail environment continues to mean retailers must compete on price. While food inflation has increased this month as the weather, oil price and other geo-political factors have influenced global agricultural markets, we expect overall prices to fall in coming months.

“Retailers’ overall sales revenues are under pressure from falling prices and this comes at the same time as business rates and other public policy decisions are pushing up operating costs; leaving retailers squeezed at both ends. The consequences of which have been plain to see. Government and policy makers must do more to address the burden of business rates and help to ease the pressure.”

Mike Watkins, Head of Retailer and Business Insight, Nielsen, said:”Despite a small increase in food prices in recent weeks, shop price inflation remains below the Consumer Price Index and the recent summer weather has lifted food sales. In contrast, we are seeing further deflation in the non-food channel and there has been little momentum in retail sales. With continued increases in crude oil prices now adding further cost to the supply chains and weak demand on the high street, retailers need to be cautious about passing on any price increases over the next few months. The good news is after a difficult couple of months, shoppers now seem to be spending again.”

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