Shop price inflation in the UK has reduced to its lowest level since November 2021, driven by significant price cuts on big-ticket items like furniture and TVs
This comes as households continue to tighten their spending with the ongoing cost of living pressures and poor weather conditions.
Deflation in the UK
According to the latest data from the British Retail Consortium (BRC) and market research firm NielsenIQ, prices in UK shops rose at an annual rate of 0.6% in May, down from 0.8% in April.
This marks the slowest pace of increase since November 2021. The decline was mainly led by non-food items, which saw an annual deflation rate of 0.8% in May, marking the second consecutive month of falling prices and the biggest drop since 2021, the Guardian reported.
Food prices, while still rising, have also shown signs of easing. They increased by 3.2% in May compared to 3.4% in April, with a slowdown in fresh food price despite production challenges during a cold and wet spring.
Is this the end of the inflation surge?
The drop in shop inflation has raised hopes that the worst of the inflation surge is over, this could prompt the Bank of England to consider cutting interest rates in the coming months to relieve financial pressure on households.
The weather has also played a significant role in these trends. The Office for National Statistics (ONS) reported a 2.3% drop in retail sales in April, partly due to higher-than-average rainfall. The poor weather led to a decline in foot traffic to shopping destinations, with a nearly 1% year-on-year decrease in visitors in the week leading up to 19 May, according to a survey by the advisory firm BDO. This survey, which focuses on mid-sized retailers, also revealed a 0.5% year-on-year dip in sales at established stores.
However, the impact on physical stores was offset by a rise in online sales, which saw a nearly 4% increase in total sales. This shift highlights the changing consumer habits as more people turn to online shopping.
Retailers have responded to demand for expensive items by cutting prices. This move aims to stimulate sales ahead of significant events like Euro 2024. Despite the general trend of price reductions, certain categories like ambient foods, which can be stored at room temperature, have seen persistent inflation due to high global sugar prices, SKY reported.
