Retail price growth slows

Jun 5, 2024

According to a recent report by the British Retail Consortium (BRC), shop prices in the UK have returned to "normal levels" as the cost of furniture, televisions, and other non-food items has decreased. The annual rate of shop price inflation was 0.6% in May, down from 0.8% the previous month, marking a positive consumer trend.

Factors behind the price normalisationSeveral factors contributed to the normalisation of shop prices. The most notable is the continuous decline in food inflation, which fell for the thirteenth consecutive month to 3.2%. This reduction in food inflation has been a significant factor in easing the overall pressure on household budgets.

Household budgets have faced substantial strain due to a series of price surges that followed the COVID-19 pandemic. The Ukraine war exacerbated these price increases, leading to a significant rise in energy costs globally. The combination of these events created a challenging economic environment for consumers, making the recent slowdown in shop price rises a welcome development.

Non-food items leading the decline
The reduction in shop prices has been particularly noticeable in non-food items. Retailers have proactively cut prices on furniture, televisions, and audio equipment. This trend is partly attributed to preparations for the upcoming Euros football tournament, where retailers anticipate increased consumer spending on entertainment and related products.

Unusually wet weather in recent months has also played a role in easing prices. Poor weather conditions can reduce consumer demand for certain seasonal goods, leading retailers to lower prices to stimulate sales. This effect has been seen across various categories, contributing to the broader trend of price stabilisation.

While food prices have continued to increase, the growth rate has slowed significantly. Fresh food inflation has fallen to its lowest level since November 2021. This trend suggests that while consumers are still facing higher food costs, the rate at which these costs are rising is decreasing, providing some relief to household budgets.

Broader economic context
High inflation rates have marked the overall economic context over the past few years. The pandemic led to supply chain disruptions, increased production costs, and shifts in consumer behaviour, all contributing to rising prices. Additionally, the geopolitical tensions arising from the Ukraine war further strained global energy supplies, driving costs across various sectors.

Despite these challenges, the recent data from the BRC indicates a positive shift towards price normalisation. The decrease in shop price inflation reflects strategic retail pricing, improved supply chain stability, and reduced consumer demand due to adverse weather conditions.

Outlook for consumers and retailers
The outlook for consumers appears to be improving as inflation rates stabilise and even show a decline in some categories. For retailers, the challenge will be to balance pricing strategies with the need to maintain profitability. As consumer confidence slowly rebuilds, retailers will likely continue to adjust prices to remain competitive and attract shoppers.

The BRC report highlights a significant improvement in the UK's retail pricing environment, and with shop prices returning to more normal levels, consumers can expect some relief from the financial pressures that have characterised the past few years.

Talk to us about your finances.