Rate of shop price deflation eases as food costs edge up

January shop prices were down 0.3% year on year, below the 0.4% decrease in prices recorded the previous month, according to the BRC-Nielsen Shop Price Index.

Shop prices across the month were lower than the 12-month flat average but above the six-month average decrease of 0.5%.

Non-food price deflation held steady month on month in January, down 1.5%  year on year and a steeper rate of decline than the 12-month average of 1%.

By contrast, food cost increases accelerated 1.6% in January compared with 1.4% in December. This increase is below the 12-month average of 1.7% but above the six-month average of 1.4%.

Ambient food costs were a key driver of this increase, as inflation in this category accelerated 2.8% in January, above 12- and six-month averages of 2.4% and 2.3% respectively and marking the highest inflation rate since April 2019.

BRC chief executive Helen Dickinson said: “Shoppers will cheer as non-food prices fell in January; a continuation of the long-term trend in retail. This was tempered by growth in food prices, which accelerated to 1.6% – slightly above the six-month average.

“Grocery prices could rise further as last year’s increase in global food prices filters through to British shelves. Nonetheless, food prices remain low by European standards.”

Nielsen’s head of retailer and business insight Mike Watkins added: “There is no inflationary pressure coming from the high street as shoppers remain nervous about spending and discounting continues for many non-food retailers.

“Whilst promotions in Supermarkets have returned to more normal levels post-Christmas, the sector remains embattled with fierce price competition, which looks set to continue. And after a decline in volumes across food retailing last year, the industry will be looking to stabilise sales in the first quarter.”