High Streets Initiative · 3 October 2018

High street prices predicted to keep escalating in run-up to Christmas

food prices
Food prices alone have now been inflationary for more than a year

Shop prices are expected to keep rising in the run-up to Christmas, with retailers hit by volatile weather and Brexit jitters throughout 2018.

The latest BRC-Nielsen Shop Price Index for September has revealed that after five years of deflation, for the second consecutive month shop prices increased on the previous year. They inched up to 0.2% from 0.1% in August.

Fresh food inflation accelerated to 1.6% from 1.5% in August, with food inflation steady at 1.9%. Ambient food inflation slowed to 2.4% in September from 2.5% in August. Non-food deflation fell slightly to 0.9% from 1%.

BRC-Nielsen said food prices had been hit by unusual weather patterns in the first half of the year as the UK shivered in a cold winter and melted in the summer heatwave. Non-food deflation had accelerated because retailers were less aggressive in discounting their products than they were a year ago.

Read more about the challenges facing UK high streets:

 “Overall shop prices were inflationary for the second month in a row, the first time in five years that prices have risen in two consecutive months. Global commodity conditions, in particular oil prices, would indicate that there are likely to be further inflationary pressures in the short to medium term which could lead to further price rises,” warned Helen Dickinson, chief executive of the British Retail Consortium (BRC).

“This would be worrying enough for hard-pressed British consumers if we weren’t staring down the barrel of a “no-deal” Brexit. Food prices alone have now been inflationary for more than a year and the BRC estimates that consumers could face up to a 29% increase in prices of products such as beef in the event of a “no-deal.”

Mike Watkins, head of retailer and business insight at Nielsen added: “Despite the return of wage growth across the economy, there continues to be pressure on the consumer wallet in particular from higher energy and travel costs.

The good news for shoppers is that Shop Price inflation continues to lag the Consumer Price Index and with the start of the Golden Quarter, and uncertainty around the underlying demand on the high street, retailers have been absorbing supply chain increases. Looking ahead we expect shoppers to maintain their grocery spend by making savings elsewhere in their overall household expenditure.” 

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