Higher food prices looming

Cash

Food deflation slowed to 0.2% in August from July’s deflation of 0.4%, the fifth consecutive month when food prices fell, new research reveals.

The BRC-NielsenIQ Shop Price Index for August shows fresh food prices fell for the ninth consecutive month in August, with deflation easing to 0.6% from a decline of 1.0% in July. This is in line with the 12-month average price growth rate of -0.6% and below the six-month average price growth of -0.9%.

In addition, ambient food inflation eased to 0.3% in August, down from 0.5% in July. This is below the 12- and six-month average price increases of 1.5% and 0.8%, respectively.

Meanwhile, non-food deflation slowed to 1.2% in August, compared to a fall of 1.8% in July.

Overall shop price deflation eased to 0.8% year-on-year in August compared to July’s decrease of 1.2%.

Mike Watkins, Head of Retailer and Business Insight at NielsenIQ, said: “The good news for shoppers is that shop price inflation remains below consumer price inflation and any moderate increases in prices are being driven by wider economic conditions and seasonal supply changes. With shoppers now returning from their summer holidays many will be reviewing their household budgets. So the next few months will be an important time for retailers to keep prices stable by absorbing as much of any increase in their supply chain costs as possible.”

Helen Dickinson, Chief Executive of the British Retail Consortium, added: “Food retailers are fighting to keep their prices down as far as possible. But mounting pressures – from rising commodity and shipping costs as well as Brexit-related red tape, mean this will not be sustainable for much longer, and food price rises are likely in the coming months.”