Shop prices fall again amid warnings of increases on the horizon

Consumers have enjoyed another month of falling shop prices amid warnings that rising food and shipping costs are likely to hit later this year.

Shop prices fell by 0.6% year-on-year in May, a slower decline than April’s decrease of 1.3%, according to the BRC-NielsenIQ Shop Price Index.

However the decline was at the slowest rate since February last year, and below the 12 and six-month average price decreases of 1.7% and 1.8% respectively.

Sourse: British Retail Consortium
Sourse: British Retail Consortium

While clothing and footwear prices continued to fall in May, the pick-up in demand once social restrictions lifted meant the drop was smaller than in previous months.

The price of furniture and electricals rose as retailers felt the lingering impact of global supply chain disruption from earlier this year.

Meanwhile, supermarkets fought hard to maintain market share and please thrifty customers by keeping prices low.

Food prices fell for a second consecutive month although deflation decelerated to 0.3% in May from April’s 0.6% – below the 12 and six-month average price increases of 0.7% and 0.1%, respectively.

Fresh food prices fell for the sixth consecutive month in May, although deflation slowed to 1% in May from 1.5% in April.

British Retail Consortium chief executive Helen Dickinson said: “It was another good month for consumers looking for bargains as prices fell again, albeit at a slower pace than last month.

“However, cost pressures are bearing down. Global food prices are currently at their highest in seven years, shipping costs have risen threefold since 2019, and commodity prices are climbing.

“We will likely see these costs filter through in the second half of this year, and with the additional Brexit red-tape this autumn, retailers may be forced to pass on some of these costs on to their customers.

“Government can help to ease the burden on British consumers by finding ways to minimise the impact of new checks and documentation required from October.”

Mike Watkins, head of retailer and business insight at NielsenIQ, said: “Consumers will be seeing the impact of higher energy and fuel costs in household bills and whilst some cost price increases are coming through the supply chain, this is not yet enough for shop price inflation to return.

“With high street retailers continuing to offer price reductions and supermarkets promoting seasonal food and drink, this is helping to offset cost-of-living increases.”