Shop Price Growth Softest Since March 2022, But Non-Food Component Stalls

BRC-NielsenIQ Shop Price inflation slowed to +2.5% Y/Y in February (vs +2.9% Y/Y prior), whilst Shop Price inflation grew on a monthly basis by +0.4% M/M (vs -0.7% M/M decline in January).

• Although there is a clear trend of disinflation driven by the Food component falling for the tenth consecutive month to +5.0% Y/Y (vs +6.1% Y/Y prior), the rate of disinflation is slowing as the Non-Food component stalls at +1.3% Y/Y (same as January) - still, it is the lowest since January 2022. External MPC member Mann recently said that she was concerned goods price inflation wouldn't return to pre-pandemic levels - which would therefore require services inflation to be lower than pre-pandemic to meet the MPC's 2% target. This is just one data point, but it does seem to support Mann's concerns.
• Note Non-Food Shop Price inflation component had deflated M/M in January however it has rebounded to +0.7% M/M in February, suggesting volatile components in January's ONS inflation reading including airfares may rebound in this month's ONS reading.
• The graph below displays the disinflation trend with both the BRC price growth and ONS NEIG and Food inflation rate falling, although the rate of decline in the last few months has reduced and indicates that NEIG inflation is likely to continue falling albeit at a slower rate, as it reaches closer towards the target range.
• Chief Executive of the BRC notes "In non-food, inflation for furniture, electricals, and health & beauty products rose, but the price of clothing continued to fall" and stresses "significant uncertainties remain as geopolitical tensions rise. Prices of non-food goods will be more susceptible to shipping costs, which have risen due to the re-routing of imports".
• The BOE MPC will welcome the progress this data displays, although will be keeping an eye on inflationary pressures potentially from import rerouting and volatile services components.