Falling food prices drop shop price inflation to 10-month-low

UK shop price inflation fell in August to its lowest level in almost a year, driven by an easing in food cost pressures, according to sector data.

According to data published by British Retail Consortium today (29), the anual rate decelerated to 6.9 per cent in August, down from 8.4 per cent in July and the lowest level since October 2022.

Helen Dickinson, chief executive of the British Retail Consortium, said the fall in shop prices was driven by the cost of food, “particularly for products such as meat, potatoes and some cooking oils”.

Inflationary pressures have been especially acute for food but the BRC data showed food inflation decelerated to 11.5 per cent in August, down from 13.4 per cent the previous month and the lowest level since September last year. Rising food prices and soaring energy costs in the wake of Russia’s full-scale invasion of Ukraine last year have been the main drivers of the cost of living crisis.

The falling price of electricity and gas in recent months has helped bring down the UK’s headline rate of inflation, which eased to 6.8 per cent in July, although it remains stubbornly high.

Official data in recent months also showed some easing in food and non-alcoholic beverages inflation. It fell to 14.9 per cent in July from 17.3 per cent the previous month, a further decline from the 45-year high of 19.2 per cent reached in March.

Research from the London School of Economics earlier this year suggested that almost a third of the rise in UK food prices since the end of 2019 could be attributed to post-Brexit trade barriers.

The BRC figures suggest the slowdown in food price inflation is continuing, holding out some relief for millions of households struggling with elevated prices. The biggest easing in pricing pressures came in fresh food, where inflation fell to 11.6 per cent this month, down from 14.3 per cent in July and the lowest level in a year, according to the BRC. For ambient food — items that can be stored at room temperature — inflation decelerated to 11.3 per cent, down from 12.3 per cent in July and the lowest level since January.

Price pressures also fell for toiletries and cosmetics as many important components became cheaper. In contrast, inflation for clothing and footwear rose as retailers unwound an extensive summer sales season, according to the BRC.

Mike Watkins, head of retailer and business insight at NielsenIQ, said the poor weather in recent weeks had damped demand, and he expected consumers “to remain cautious about discretionary spend even as inflation decelerates”.