MNI: UK Shop Price Deflation Increases In March - BRC

--UK Mar Shop Prices -1.0% y/y Versus -0.8% In Feb

     LONDON (MNI) - UK shop prices fell by a larger extent in March, driven by

food inflation slipping to a 12-month low, data from the British Retail

Consortium showed.

     The BRC Shop Price Index (SPI) fell 0.1% on the month in February, taking

prices down 1.0% on the year, slipping away from the -0.8% result seen in

February. The data overall are consistent with the picture of UK inflation

trending lower in the coming months as the impact of the pound's depreciation

begins to fade.

     The official data showed that since peaking at 3.1% in November, headline

CPI fell to 3.0% in both December and January, and more recently to 2.7% in

February.  

     There was a substantial slowdown in food price inflation in March according

to the SPI. The March data followed February's 0.3 percentage point decline with

a further 1.2pp slip in March, leaving the index at 0.4% yup ear-on-year -- the

lowest level in a year. 

     Within this, fresh food inflation slowed to 0.3% y/y, down from 0.9% in

February, its lowest level since March 2017. Ambient food prices, that is food

altered to lengthen shelf life, also trended lower, falling by almost two

percentage points to 0.6% y/y -- the lowest rate since last February.    

     Non-food items continued to ease in price in March but the rate of

deflation softened. Year-on-year, non-food prices declined by 1.9%, less than

the 2.2% deflation rate recorded a month prior.  

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

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

inflation in the official data. 

     "Consumers are still coping with falling disposable incomes and non-food

retailers are having to keep price increases to a minimum or make further price

cuts, as consumer demand has been weak since the start of the year," said Mike

Watkins, Head of Retailer and Business Insight, Nielsen. 

     "With inflationary pressure receding in the food supply chain, we can now

expect supermarkets to focus on lowering prices and to use promotions to drive

visits as part of the battle for gaining share of wallet," he added. 

     Recent pay awards data, including the likes of the Bank of England's

Agents' Summary surveys and the monthly XpertHR surveys, have shown a slight

pickup in wage growth as workers secured New Year pay hikes above the 2.0%

threshold seen in recent years. 

     According to Helen Dickenson, Chief Executive of the British Retail

Consortium, however, household's purchasing power could remain restrained for

some time yet.  

     "So some welcome respite for consumers, particularly with the gap between

inflation and wage growth finally narrowing. But with further wage increases on

the horizon putting upward pressure on prices, consumers will continue to feel

the grip on their spending power," said Helen Dickinson OBE, Chief Executive,

British Retail Consortium.

--MNI London Bureau; +44 203-586-2226; email: jamie.satchithanantham@marketnews.com

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