Despite Rise In Food Price “Reassuring signs” As Deflation Continues

The latest BRC-Nielsen Shop Price Index report shows, overall shop prices dropped by 0.5 % year-on-year in the last six days to January 8, though the rate of deflation showed from 0.6% a month earlier.

Despite “non-food prices creeping ever so slightly towards inflation”, the disparity between food and non-food prices continued to grow.

Excluding December, non-food deflation rates were the deepest since last March, but the 1.9% drop was still than 2.1% seen throughout December.

In mean time, food inflation edged up from 1.8% in December to 1.9% in January. It is the highest level of inflation marked since October.

The rise was driven by ambient food which saw prices jump 2.2%, up from 1.7% in December.

This was partially offset by fresh food, seeing inflation ease from 2% in December to 1.7%.

“There are reassuring signs for consumers from the fall in latest input price inflation, that the worst effects of sterling’s depreciation have now passed,” BRC chief executive Helen Dickinson said.

Global food prices also slowdown in inflation in most categories according to a report. Before there is a raise in hopes for that stretched household budgets will be offered some much needed slack, we also need to consider the impact of rising oil prices on reaching a 3 year high in January. It will inevitably add some heat to the rate of inflation in coming months.

Nielsen’s head of retail and business insight Mike Watkins added: “With consumer’s willingness to spend weakened by the return of inflation and shopper sentiment more fragile than a year ago, retailers are continuing to hold back on price increases.”

“The good news is that price increases across supermarkets are beginning to slow and some non food retailers are also using short term promotions and offers to encourage shoppers back into store to kick start demand.”