Shop price inflation slows to lowest rate ahead of headwinds

UK shop inflation eased to the lowest rate in more than a year in November as competition increased in the run-up to Christmas and food cost growth continued to fall, according to industry data, as retailers set to face new headwinds in 2024 owing to business rates bills and biggest rise to the National Living Wage.

The British Retail Consortium said today (28) that annual shop price inflation slowed to 4.3 per cent from 5.2 per cent in October, the sixth consecutive monthly decline and the lowest rate since June last year.

Food inflation decelerated to 7.8 per cent in November, down from 8.8 per cent in October. This is below the 3-month average rate of 8.9 per cent and is the seventh consecutive deceleration in the food category. Inflation is its lowest since July 2022.

Fresh Food inflation slowed further in November, to 6.7 per cent, down from 8.3 per cent in October, at its lowest since June 2022.

Ambient Food inflation decelerated to 9.2 per cent in November, down from 9.5 per cent in October.

The BRC shop price index, which provides an early indication of pricing pressures ahead of the publication of official data on December 20, will raise hopes that slowing inflation and strong wage growth will support sales during the festive period.

BRC chief executive Helen Dickinson said the fall resulted from retailers competing “fiercely to bring prices down for customers ahead of Christmas”.

The BRC said price cuts in health and beauty products — as retailers rushed to shift stock — had led to a small month-on-month drop in non-food prices, which helped bring the annual rate of inflation in this category down to 2.5 per cent from 3.4 per cent in October.

“Ambient food inflation slowed but remained higher than fresh food due to a larger proportion of goods being imported to the UK and impacted by the weak pound. Retailers are committed to delivering an affordable Christmas for their customers. They face new headwinds in 2024 – from government-imposed increases in business rates bills, to the hidden costs of complying with new regulations. Combining these with the biggest rise to the National Living Wage on record will likely stall or even reverse progress made thus far on bringing down inflation, particularly in food.”

Mike Watkins, Head of Retailer and Business Insight, NielsenIQ, said, “With the recent slow-down in consumer spending, many non-food retailers will have been reliant on Black Friday to kick starts sales to avoid discounting in December, whereas food retailers will be optimistic that footfall will increase as inflation slows and shoppers get into a festive mood. Across all retail, this year shoppers will be making savings on everyday essentials to help pay for their family Christmas.”