Non-food deflation dips to four-year low

Here’s why

Overall Shop Price deflation was 0.3 per cent in August, a slight deceleration from the 0.4 per cent fall in July. Except for June of this year, this is the shallowest deflation rate since November 2013.

The deflation rate for prices of Non-Food products was 1.3 per cent, the slowest rate of deflation since April 2013. Electronics posted the slowest rate of deflation on record (the SPI started in 2006).

Food prices increased by 1.3 per cent in August on the same month last year, a slight increase on July, when Food price inflation stood at 1.2 per cent.

This is the second month we have seen an easing in the inflation rate of Fresh Food. It slowed to 0.8 per cent in August from 1.0 per cent in July.

In contrast, the inflation rate of Ambient Food prices accelerated to 1.9 per cent in August from 1.6 per cent in July. This is the highest inflation rate for Ambient Food since December 2013.

Helen Dickinson OBE, Chief Executive, British Retail Consortium:

“Non-Food deflation reached its lowest rate in more than four years in August as overall Shop Prices edged closer to inflation.

“The reality is that with protection from hedging policies coming to an end, Non-Food retailers are running out of options for protecting shoppers from the significant increases in the price of imported goods since the EU referendum in June last year. We expect Non-Food prices to continue trending towards year on year inflation.

“Food inflation also moved upward, driven by an acceleration of Ambient Food inflation, although the slowdown in Fresh Food inflation for a second month kept a lid on overall increases in the price of the weekly grocery shop. The seasonal availability of fruit and vegetables from UK suppliers is currently shielding shoppers from the impact of higher import prices. However, as Winter approaches and our dependence shifts to imported goods, that will change.

“While the dynamics of individual elements of the index play out in different ways from month to month, the fact is that the overall pressures on prices are still weighted upwards. That will put an increasing strain on already stretched family budgets. Therefore, it is imperative that the Government puts the UK’s households at the top of its agenda as it enters into negotiations on our future trading relationship with the EU. It should do all it can to avoid a situation where further tariffs and administrative costs lead to price increases on top of those already being faced by consumers.”