Shop prices fall again in May as pressure mounts on retailers

Overall shop prices fell by 1.1% compared with the same time last year to mark up the 61st month of deflation, the deepest since January 2017, according to the BRC-Nielsen Shop Price Index.

Prices of non-food items were 2.5% lower than in May last year, their deepest deflation since August 2016.

However the increase in food prices picked up to 1.2% from 1% in April as weather and oil prices influenced global agricultural markets.

Ambient food inflation accelerated to 1.7% in May from 1.2% a month earlier but fresh food inflation was unchanged at 0.9%.

The British Retail Consortium said it expected overall food prices to fall in coming months.

CEO Helen Dickinson said: “Overall shop prices fell again in May as the impact of the pound’s fall following the EU referendum reduces and the challenging retail environment continues to mean retailers must compete on price.

“Retailers’ overall sales revenues are under pressure from falling prices and this comes at the same time as business rates and other public policy decisions are pushing up operating costs, leaving retailers squeezed at both ends.

“The consequences of which have been plain to see.

“Government and policy makers must do more to address the burden of business rates and help to ease the pressure.”

Mike Watkins, head of retailer and business insight at Nielsen, said: “Despite a small increase in food prices in recent weeks, shop price inflation remains below the Consumer Price Index and the recent summer weather has lifted food sales.

“In contrast, we are seeing further deflation in the non-food channel and there has been little momentum in retail sales.

“With continued increases in crude oil prices now adding further cost to the supply chains and weak demand on the high street, retailers need to be cautious about passing on any price increases over the next few months.

“The good news is, after a difficult couple of months, shoppers now seem to be spending again.”