Biggest decline in shop prices since 2006

May shop prices tumbled at the fastest rate of decline since 2006, falling by 2.4% against a 1.7% decrease in April. This was “largely” driven by a sharp fall in non-food prices, which fell “sharply” by 4.6% in the period, compared to a decline of 3.6% the month prior. This again marked the highest rate of decline in 14 years. Clothing and furniture saw the biggest drop in prices, which the BRC attributed to promotions run by retailers in efforts to encourage spending and mitigate recent losses. Nonetheless, year-on-year food prices slightly increased, with food inflation easing to 1.5% in May, down from 1.8% in April. This was largely due to higher business costs, implementing social distancing measures and an “upward pressure” from labour shortages. Food prices were still down on a monthly basis as consumers turned to local produce, however. Helen Dickinson OBE, CEO of British Retail Consortium, said: “We expect to see continued upward pressure on food prices from the effects of the pandemic in the coming months, while non-food prices are likely to remain deflationary with subdued sales. “Even as non-essential shops begin to reopen from 15 June, consumer demand is expected to remain weak and many retailers will have to fight to survive, especially with the added costs of social distancing measures.” She added: “Retailers face an uphill battle to continue to provide their customers with high quality and great value products despite mounting costs. “Government support remains essential, both to rebuild consumer confidence and to support the thousands of firms and millions of jobs that rely on it.” Mike Watkins, head of retailer and business insight, Nielsen, said:“With the retail industry coping with store closures and social distancing limitations, it’s no surprise to see shop price inflation slowing in recent weeks. “Across the major supermarkets with sales growths in high single digits in May, the consumer spend on promotions has also been at an all-time low, but there has been little upwards pressure on prices.” He added: “However, as we move towards summer with the importance of seasonal foods and with the supply chain still disrupted, we can anticipate some volatility in prices.”