Shop prices fall in March but deflation eases to slowest rate since August

Overall shop prices, including food and non-food, slipped 1.7% in March compared with the previous year, according to the BRC-Nielsen Shop Price Index.

That was the slowest fall since August 2015, easing from a 2% drop in February, but it extended the run of continually falling shop prices to three years.

Non-food prices fell 2.6% last month compared with the same period in 2015, registering a slower rate of deflation than the 3% drop in non-food prices recorded in February.

Food prices fell 0.4% in March year-on-year – the same rate of decline as the grocery sector reported the previous month.

Lower prices of fresh food drove the deflation, BRC-Nielsen said, as the cost of basket staples including fruit, vegetables, milk, cheese, eggs and meats declined.

Ambient food prices rose 0.4% during the month, driven by inflation within the bread, cereals and alcohol categories.

The BRC-Nielsen data said that deflation deepened in the fashion sector, with menswear, kidswear, babywear and footwear all reporting falling prices. Furniture and carpets also saw prices drop further in March than they did in the previous month.

British Retail Consortium chief executive Helen Dickinson said: “Despite consumer confidence remaining at zero, a relatively benign economic environment and a fiercely competitive market will see retailers continue to respond to their customers with prices and promotions to maintain market share as the spring season kicks off.”

Nielsen’s head of retail and business insight, Mike Watkins, added: “Shoppers are still making changes to how they spend to stay within their household budget and looking out for price cuts and promotions is one of the ways to save money.

“So with shop prices continuing to be lower than a year ago this is good news for shoppers. With spring arriving, retailers will be hoping that this drives store traffic, as so far this year retail sales have been rather unpredictable.”