Shop prices fall at fastest rate since 2006 as Covid-19 hammers sales

Shop prices in May fell 2.4% compared to a 1.7% decline in April, marking the fastest rate since the BRC-Nielsen shop price index began recording data in December 2006.

The fall was also below the 12- and six-month average price decreases of 0.7% and 1.0% respectively. 

The drop in shop prices was largely driven by the sharp decline in non-food categories, which recorded a 4.6% fall in May compared to 3.7% in April. This was also the steepest rate of decline since the index was launched.

Food inflation eased slightly to 1.5% in May, down from 1.8% in April, a figure in line with both the 12- and six-month average price increases of 1.5%.

Fresh and ambient food inflation decelerated in May, the former reduced to 0.5% from 1.0% in April, and the latter slowed slightly to 2.9% from 3.0% in April.

BRC chief executive Helen Dickinson said: “Shop prices in May fell at their fastest rate since 2006, which was largely driven by the drop in non-food prices. Clothing and furniture saw the biggest drop as retailers ran promotions to encourage consumer spending and attempted to mitigate recent losses.

”Year-on-year food prices increased slightly due to higher business costs, implementing social distancing measures and the upward pressure from labour shortages, but were down on the previous month as more home-grown produce became available. We expect to see continued upward pressure on food prices from the effects of the pandemic in the coming months, while non-food prices are likely to remain deflationary with subdued sales.

“Even as non-essential shops begin to reopen from 15 June, consumer demand is expected to remain weak and many retailers will have to fight to survive, especially with the added costs of social distancing measures. Retailers face an uphill battle to continue to provide their customers with high quality and great value products despite mounting costs. Government support remains essential, both to rebuild consumer confidence and to support the thousands of firms and millions of jobs that rely on it.”

Nielsen head of retailer and business insight Mike Watkins added: “With the retail industry coping with store closures and social distancing limitations, it’s no surprise to see shop price inflation slowing in recent weeks. Across the major supermarkets with sales growths in high single digits in May, the consumer spend on promotions has also been at an all-time low, but there has been little upwards pressure on prices. However, as we move towards summer with the importance of seasonal foods and with the supply chain still disrupted, we can anticipate some volatility in prices.”