MNI: UK August Shop Prices End 63 Months of Deflation -- BRC

--Shop Prices Up 0.1% y/y, Following July's 0.3% Decline

By Jai Lakhani

     LONDON (MNI) - UK shop prices ended 63 months of deflation in August,

rising by 0.1% y/y, following a 0.3% decline in July, according to data from the

British Retail Consortium (BRC).

     On a monthly basis, the BRC Shop Price Index (SPI) was up 0.6%, compared to

a decline of 0.2% m/m in July.

     Food price inflation, which accelerated to 1.9% y/y in August from 1.6% in

July, was the key driver of the headline rise. Both fresh food and ambient food

inflation picked up by 0.3pp, to 1.5% and 2.5% y/y respectively. Food prices

were stoked by the hot summer weather as well as the partial pass-through of

higher oil and agricultural product prices seen earlier in the year.

     While non-food prices continued to decline, the pace of deflation moderated

to 1.0%, from 1.4% in July. This reflected a shift in retailers' approach to

promotional activity, with strong demand for summer products earlier in the

season reducing the need for discounts on these lines. However, this was not the

case with all non-food items -- indeed, the clothing category continues to

exhibit the sharpest pace of deflation.

     The SPI covers only a slice of the UK consumer price basket, with the

non-food element of the index covering some of the same ground as core goods

inflation in the official data.

     "Despite significant increases in costs in the supply chain, this month's

figures show that retailers are keeping price increases faced by consumers to a

minimum. However, current inflationary pressures pale in comparison to potential

increases in costs retailers will face in the event we leave the EU without a

deal," said Helen Dickinson, Chief Executive at the British Retail Consortium.

     "With the recent hot summer weather, shoppers have been visiting food

stores more often and purchasing more food and drink... So it's of no surprise

that shop price inflation is a little higher this month," added Mike Watkins,

Head of Retailer and Business Insight at Nielsen.

--MNI London Bureau; +44 203 865 3828; email: jai.lakhani@marketnews.com

--MNI London Bureau; +44 207-862-7489; email: ukeditorial@marketnews.com

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