Shop price inflation slows as retailers ramp up promotions to drive demand

Shop price inflation slowed in September as competition between retailers offset poor harvests and global commodity price rises, industry figures show.

Shop prices overall were 1.4% up on a year ago, down from August’s growth of 1.5%, according to the British Retail Consortium (BRC) and NIQ.

Food inflation also slowed, to 2.5% from August’s 2.8%, with even fresh food inflation falling from 3% a month earlier to 2.6%.

Inflation on products other than food dropped from 0.9% to 0.8% – although this remains above the three-month average of 0.6% – driven by strong discounting on the cost of back-to-school essentials including books, stationery, footwear and electricals.

BRC chief executive Helen Dickinson said: “Shop price inflation edged down this month, with food inflation falling as competition between retailers continued to deliver value for shoppers.

“Promotions helped bring down meat and dairy prices, though poor harvests across Europe pushed up fruit prices and high global commodity prices kept chocolate and confectionery prices elevated.

“Retailers have absorbed wave after wave of extra costs, but there is a limit to what businesses can shoulder.

“With higher business rates set to hit in April, alongside rising employment costs, energy bills and packaging taxes, the Budget is a fork in the road.

“The Chancellor can help keep prices down by freezing the rates rise and removing shops from the business rates surtax, or risk pushing even more costs onto consumers.”

Mike Watkins, head of retailer and business insight at NIQ, said: “So many retailers have maintained promotions, and some have introduced price cuts to help drive demand, all of which is helping to keep inflation lower than a year ago.

“Q4 is expected to bring tighter household budgeting, so retailers will still need to absorb cost increases wherever possible.”