• Paul Kelson

Shop Prices Fall At Fastest Rate In 14 Years

Shop prices in May fell at their fastest rate since 2006 as non-food retailers offered discounts to encourage consumer spending during the coronavirus crisis. Food inflation also eased despite a move away from promotions in the supermarket sector.

The BRC-Nielsen Shop Price Index shows overall prices fell by 2.4% last month following a decline of 1.7% in April as high street shopping was curtailed by the lockdown.

Deflation was driven by non-food prices which fell by 4.6% in May compared to a drop of 3.7% the month before. Clothing and furniture prices fell the most last month as retailers rolled out deals in a bid to attract shoppers online and offset the impact of store closures.

Meanwhile, despite recent talk that the removal of promotions may lead to higher prices in supermarkets, food inflation slowed in May. It eased to 1.5% from 1.8% in April, with fresh food inflation slowing to 0.5% (from 1.0%) and ambient food inflation decelerating slightly to 2.9% (from 3.0%).

The BRC stated that whilst year-on-year food prices had increased slightly due to higher business costs (social distancing measures and upward pressure from labour shortages), they were down on the previous month as more home-grown produce became available.

Mike Watkins, Head of Retailer and Business Insight at Nielsen, commented: “Across the major supermarkets with sales growths in high single digits in May, the consumer spend on promotions has also been at an all-time low, but there has been little upwards pressure on prices. However, as we move towards summer with the importance of seasonal foods and with the supply chain still disrupted, we can anticipate some volatility in prices.”

The BRC’s Chief Executive Helen Dickinson added: “We expect to see continued upward pressure on food prices from the effects of the pandemic in the coming months, while non-food prices are likely to remain deflationary with subdued sales.

“Even as non-essential shops begin to reopen from 15 June, consumer demand is expected to remain weak and many retailers will have to fight to survive, especially with the added costs of social distancing measures.”

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