Recent data reveals a minor decrease in shop price deflation for November.
- Shop prices declined by 0.6% in November, a reduction from October’s 0.8%.
- November’s shop price decrease is marginally higher than the average for the past three months.
- Non-food items continued to see deflation, albeit at a slower rate, moving from -2.1% to -1.8%.
- Retail sector anticipates future cost pressures threatening current pricing trends.
The British Retail Consortium (BRC) and NielsenIQ’s latest Shop Price Index data shows a mild deceleration in the rate of shop price deflation to 0.6% in November, slightly above the three-month average decline of 0.7%. This marks the lowest annual growth rate in shop prices since September 2021. The reduction in deflation suggests a stabilising trend in prices which could impact consumer spending behaviours.
Deflation in non-food prices continued but at a reduced rate of 1.8% in November, compared to 2.1% the previous month. This figure is still slightly above the three-month average of 2.0%. The ongoing deflation in non-food items, particularly fashion and furniture, indicates persistent pressure on retailers to manage pricing strategies, balancing the need to maintain appeal with the necessity of covering costs.
Conversely, food price inflation showed a subtle decrease, standing at 1.8% down from October’s 1.9%. This shift signals a slight easing in the upward pressure on food prices, albeit consumer spending remains sensitive to these changes. The small adjustment in inflation rates across these categories highlights the broader economic conditions impacting the retail landscape.
According to Helen Dickinson, Chief Executive of the BRC, “November was the first time in 17 months that shop price inflation has been higher than the previous month, albeit remaining overall in negative territory.” Amidst reduced discounting, opportunities for finding bargains in fashion and other non-food items were still present, especially during early Black Friday sales. Dickinson also warns that upcoming cost increases, including changes to Employers’ National Insurance Contributions, business rates, and the introduction of a new packaging levy, could exert upward pressure on prices if not managed carefully by retailers.
Retailers face significant challenges going forward. With forecasted additional costs of £7 billion in 2025 due to legislative changes and inflationary pressures, the sector’s traditionally slim margins are under threat. Retailers are urged to strategically address these challenges, potentially advocating for governmental intervention to mitigate the impact of impending cost increases. Should adjustments to business rates and other fiscal policies not occur, price adjustments upwards may be inevitable.
The current retail environment, while still offering consumer bargains, faces challenges from upcoming fiscal pressures that may influence future pricing.
