UK : Shop price inflation hits highest level so far this year

Year-on-Year:
The BRC-Nielsen Shop Price Index (SPI) for October shows that prices were 1.1% higher than at the same time a year ago. This is the highest year-on-year rise in shop prices so far this year and caused by the continued inflationary cost pressures in food filtering through to overall prices, which showed a year-on-year rise of 3.7%, up from 2.7% in September. This is the highest rate of inflation for food since May 2007, when it was 3.8%.
Non-food prices continue to fall, although the rate of deflation has eased to -0.2% in October from -0.7% in September. The majority of this deflation in non-food is coming from clothing and footwear and electricals. Less pressure is coming from housing-related and big-ticket items.
Month-on-Month:
Shop prices rose 0.5% between September and October, slightly higher than the month-on-month rise of 0.2% in August. The rise was caused by a 1.4% increase in food prices on September, the highest month-on-month rise since this survey began in December 2005. Non-food prices showed no change between September and October, as discounting and promotional activity continued.
However, despite the high level of inflation in food, non-food continues to keep overall shop price inflation down and well below the CPI, currently at 1.8%. While food price inflation is likely to remain relatively high in the coming months, as market conditions tighten, discounting in non-food is set to continue. As a result the retail industry will continue to exert strong downward pressure on the CPI.

Kevin Hawkins, Director General, BRC comments:
“Although intense price competition within non-food is keeping overall inflation low, it continues to be outweighed by food inflation. Food prices are being driven by global factors outside the control of the grocery industry, but supermarkets are fighting hard to reduce the impact on consumers, especially given all the other pressures on household incomes.”
Mike Watkins, Senior Manager, Retailer Services, Nielsen comments:
“Levels of retail spend are going to be hard to predict over the next few months. Non-food only retailers will need to maintain these lower prices and also keep a close watch on the Christmas activity of hypermarkets.
And supermarkets will be working hard to keep sales growing above the +4% that we have seen in the last 12 weeks, as the cost price increases that are being reflected in some food price inflation will inevitably make shoppers more cautious.”