Shop price inflation edges up to 1.5%

Food inflation stayed at 4.5% in May for the second month in a row as commodity prices eased helping to offset rising property and distribution costs. The BRC expected food inflation to slow in the near term and remain broadly stable in the medium term.

Deflation in non-food slowed to 0.1% in May from 0.5% in April as retailers struggled to continue discounting.

BRC director general Stephen Robertson said: “For the fourth month in a row non-food goods are cheaper than they were a year ago, chiefly thanks to price cutting on clothing, footwear and electricals.

“But some prices are moving upwards as retailers struggle to maintain the margin-sapping discounts which reached unsustainable levels in the face of weak consumer spending.  That’s seen overall shop price inflation edge up slightly.

“Food inflation held steady as easing commodity prices helped combat rising property and distribution costs.  There’s still a possibility of future supply shocks but the outlook for inflation looks set to remain at modest levels.  Apart from a blip in March, food inflation’s been stable since last October”

According to the Index, prices across some ambient foods were “significantly” down on both an annual and three-month basis with sugar and coffee both showing double-digit declines. These falls also fed through to non-alcoholic beverages.

Other factors keeping inflation down included an 18% drop in oil prices, while the input price of imported food materials such as cereals, fruit and vegetables not grown in the UK remained at 4.6% for the second month in a row, which is below the 12-month average of 9%.

Clothing and footwear deflation slowed to 5% in May from 5.4% in April – the lowest rate in four months. This was driven by lower deflation in men’s and children’s clothing. Deflation across women’s clothing also slowed but to a lesser extent.

Nielsen senior manager of retailer services Mike Watkins said: “With the summer of events and celebration now under way, and after a couple of months of weak sales, marketing programmes and promotions have been ramped up by retailers.”