February shop prices fall as fresh food inflation slows

Deflation deepened to 0.8% in February from 0.5% in January as non-food shop prices continue to drive a deflationary period that has now lasted 58 months.

Non-food prices decreased at a rate of 2.2% in February as they hit the deepest deflationary period since April 2017, according to the BRC-Nielsen Shop Price Index.

Food inflation eased to 1.6% in February compared to 1.9% in January, which was driven by a slowdown in fresh food.

Fresh food prices increased by 0.9% in February, which was significantly below the 1.7% increase in January.

In contrast, ambient food inflation continued to accelerate with prices increasing in 2.5% in February compared to 2.2% in January, the highest rate of inflation since September.

‘Passed the peak’

Helen Dickinson, chief executive at the British Retail Consortium, said fresh food recording the biggest reduction in the inflation rate was a “further sign that we have passed the peak of the upward pressure on inflation caused by the fall in the pound in June 2016”.

Mike Watkins, head of retailer and business insight at Nielsen, believes the latest figures suggest food inflation is near its peak.

He said: “Food retailers continue to see sales growth and this is being supported by inflation, as the cost price of some food in particular ambient grocery has increased since the start of the year.

“However not all of the increases have been passed onto shoppers and we are now seeing food inflation beginning to peak.”

Dickinson predicts retailers can expect a continuation of the tough trading environment over the coming months due to deflation.

She added: “With that in mind, it’s imperative we get clarity and a definitive agreement over the next month’s Brexit negotiations around the exact form of the transition arrangements.

“Both the transition and the UK’s future relationship with the EU will determine how we maintain consumers’ current access to a diverse choice of affordable goods.”