NON-FOOD SHOP PRICE DEFLATION CONTINUES

9 May 2007

Year-on-Year

The BRC-Nielsen Shop Price Index (SPI) for April showed that prices were 0.8% higher than at the same time a year ago, continuing the marginal increase in shop price inflation. Food inflation continues to cause the majority of upward pressure on shop price inflation, with food prices 3.9% higher than a year ago, up from 3.6% in March.   Although slowing marginally, non-food continues to show deflation, with prices 0.6% lower than in April 2006, compared to 0.7% lower in March. Even with the inflationary pressures from food, the SPI is still significantly lower than the official government measures of inflation, emphasising once again that there is little inflationary pressure coming from retail, especially non-food retailers.

Month-on-Month 

Between March and April, overall shop prices showed no change from March.  This was in part due to slowing inflationary pressure from food prices, which increased by 0.2% between March and April, much less than the 0.5% rise between February and March. The small increase in food prices in April was offset by the decline in non-food prices. After two consecutive months of rising prices, the non-food index fell by 0.1% between March and April, as a result of mid-season and spring sales.

Kevin Hawkins, Director General, BRC comments:

“With food inflation continuing to ease and deflation in non-food still showing no signs of abating, the high street is still not generating any real inflationary pressure. Consumer confidence remains fragile and recent interest rate rises, combined with rising living costs, have started to affect consumer spending. While there is a general expectation of another rate increase this month, from a consumer and retailer point of view, we would urge the MPC to let the three previous interest rate increases work through before resorting to another one.” 

Mike Watkins, Senior Manager, Retailer Services, Nielsen comments:

“Easter was strong for many food retailers with top-line sales growths of up to 8% helped by the good weather, with Fresh Foods and Soft Drinks in double digit growth. So whilst there continues to some food price inflation a driver of the buoyant foods sales is that the consumer is `trading up `to healthy and more premium food - spending the savings made in packaged grocery and non-foods. And some of these saving are coming from non food retailers where prices continue to deflate.”