FOOD PRICES FALL FOR FIRST TIME IN 11 MONTHS

7 March 2007

Year-on-Year
After easing off in January the BRC Shop Price Index (SPI) for February showed that high street inflation slowed further, with overall prices 1.79% higher than a year ago, compared to 1.84% higher in January and 2.28% higher in December.

Despite this fall in the inflation rate, February is the eighth consecutive month to show a year-on-year increase. Despite showing a slight fall compared to January, the main driver behind the higher inflation rate continues to come from food, due to varying commodity prices and greater seasonal fluctuations. The food rate now stands at 5.18%, down slightly from 5.36% in January. Non-food prices were only 0.19% higher than in February 2006, a slight increase from 0.17% in January, showing the negligible amount of upward pressure non-food items continue to have on shop prices.

Month-on-Month 
Between January and February, overall shop prices increased by 0.29% after showing a fall of 0.62% between December and January.  Non-food prices were the main driver behind the month-on-month increase, with the non-food index rising by 0.48% from January, after falling by 1.13% between December and January. For the first time in almost a year, the food index showed a month-on-month fall, falling by 0.09% from January, suggesting food price inflation is easing. 

Despite these increases, the SPI remains significantly lower than the official government measures of inflation, emphasising once again that there is still little inflationary pressure coming from the high street.

Kevin Hawkins, Director General, BRC comments:

“Food inflation is continuing to fall and non-food prices have hardly changed since this time last year. While the overall change in retail prices is gradual, it is essential that the disinflationary effects of the recent increases in interest rates are given time to work through. We must avoid over-kill.” 

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

“Post Christmas most food retailers continue to see strong consumer demand .And this is translating into good sales growths most notably in premium food and general merchandise. Nevertheless if food price inflation does ease over the next few months and if sales also begin to slow, retailers may need to compensate with extra promotions and deeper price cuts which is something that non food retailers have had to execute for some months now.”