Shop price inflation remains unchanged amid warning of uncertainty ahead

Shop price inflation remained unchanged in July after months of slowing amid a warning of uncertainty ahead.

Overall annual inflation remained at 0.2%, below the three-month average of 0.3% and its lowest rate since October 2021, according to the British Retail Consortium (BRC)-NielsenIQ Shop Price Index.

Food inflation slowed further from June’s 2.5% to 2.3% and its lowest rate since December 2021, while fresh food prices are now 1.4% higher than a year ago, down from 1.5% in June.

Deflation continued on non-food items, which are now 0.9% cheaper than a year ago overall, although this slowed from June’s 1%.

Holiday makers could pick up bargain summer wear and summer reads as clothing and footwear prices fell for the seventh consecutive month amid persistent weak demand, and the prices of books fell.

However the BRC warned that the impact of climate change on harvests as well as rising geopolitical tensions could lead to renewed inflation.

BRC chief executive Helen Dickinson said: “The 2023 declines in global food commodity prices continued to feed through, helping bring down food inflation rates over the first seven months of 2024.

“However this shows signs of reversing, suggesting renewed pressure on food prices in the future.

“UK households suffered from high levels of inflation in 2022 and 2023 and can celebrate inflation levels returning to normal over the first half of this year. But, with the outlook for commodity prices remaining uncertain due to the impact of climate change on harvests domestically and globally, as well as rising geopolitical tensions, renewed inflationary pressures could be lurking just over the horizon.”

Mike Watkins, head of retailer and business insight at NielsenIQ, said: “As we cycle through high inflation comparatives from a year ago we can expect a lower level of inflation for a number of months to come.

“But with the squeeze on household finances continuing, consumer confidence only slowly improving, and poor summer weather so far, retailers will still need to keep any price increases to a minimum to encourage shoppers to spend.”