Shop price annual inflation falls to a two-year low

Helen Dickinson, BRC CEO

The latest figures from the British Retail Consortium (BRC) show that shop price inflation in January was the lowest since May 2022, driven by the non-food category.

Shop price annual inflation fell to 2.9% in January, down from 4.3% in December. This was below the three-month average of 3.9% and the lowest it has been since May 2022.

In the non-food category, inflation fell to 1.3% from 3.1% in December, below the three-month average of 2.4% and the lowest since February 2022. The BRC pointed out that this steep fall in non-food price inflation was likely driven by heavy discounting.

That heavy discounting was one aspect of what is otherwise a good-news story, but raised cause for concern with the British Independent Retailers Association, where chief executive Andrew Goodacre said: “After a blip in December it is good to see inflation falling again. Given the low demand it is no surprise to see non-food retailers needing to discount significantly. However, this means reduced margins at a time when the costs of running a business continue to rise.

Andrew Goodacre, Bira CEO

“We hope that lower inflation results in a cut in interest rates to boost consumer confidence. We also hope that the Chancellor uses his Spring budget to further improve consumer confidence and focus on economic growth.”

Commenting on the latest shop price inflation figures, BRC chief executive Helen Dickinson said: “Some New Year cheer as January shop price inflation slid to its lowest level since May 2022. Non-food goods drove the fall, as many retailers offered heavily discounted goods in their January sales to entice consumer spend amidst weak demand. Good news for the morning brew as the price of tea and milk fell, while evening tipples remained more expensive on the back of increased alcohol duties.

“Retailers have spent the last eight months working to bring down inflation, but progress will likely be hampered by new cost pressures coming direct from government – including implementing the increase in the National Living Wage on top of an above inflation rise in business rates this April, a potential new grocer ‘surtax’ in Scotland, and ill-conceived recycling proposals. Rising geopolitical tensions will also add to uncertainty and costs in supply chains. With a General Election later this year, we want to see political parties outline how they will help unlock investment across the country rather than the current trajectory which is doing just the opposite.”

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