Cost pressures filter into prices

Period Covered: 01 – 07 September 2021

Shop Price annual deflation eased to 0.5% in September compared to August’s decrease of 0.8%. This is a slower rate of decline than the 12- and 6-month average price decreases of 1.4% and 0.8%, respectively. This is the slowest rate of decline since January 2020.

• Non-Food deflation slowed to 1.0% in September, compared to a fall of 1.2% in August. This is a slower rate of decline than the 12- and 6-month average price declines of 2.4% and 1.2%, respectively.
• Following five months of deflation, Food prices rose by 0.1% in September, up from -0.2% in August. This is below the 12-month average price growth rate of 0.2% and above the 6-month average price growth rate of -0.3%.
• Fresh Food prices fell for the tenth consecutive month in September, with deflation easing to 0.4% from a decline of 0.6% in August. This is above the 12- and 6-month average price growth rates of -0.6% and -0.9%, respectively.
• Ambient Food inflation accelerated to 0.8% in September, up from 0.3% in August. This is below the 12- month average price increase of 1.3% and above the 6-month average price increase of 0.6%.

Helen Dickinson OBE, chief executive of the British Retail Consortium, said: “September saw overall prices fall, but the decline is slowing. There are now clear signs the months-long cost pressures from rising transport costs, labour shortages, Brexit red-tape, and commodity costs are starting to filter through to consumer prices. Food prices rose year-on-year for the first time in six months, and some non-food products, such as DIY & gardening, are seeing the highest rate of inflation since summer 2018. Other product ranges, such as furniture and electricals, have also seen annual prices rise for consecutive months, which is indicative of unresolved shipping issues coupled with high demand.

“It is inevitable that prices will continue to rise, but government intervention would minimise the impact on consumers. Supply chains have been put to the test recently, with CO2 and HGV shortages. Government needs to find a long-term solution to the HGV driver shortage by expanding the size and scope of the new visa scheme for drivers from abroad so they can fill the gaps while new British drivers are trained. Without this, these additional burdens to what is already a precarious trading environment, will affect the British consumer and the prices they pay for the goods they want and need.”

Mike Watkins, head of retailer and business insight, NielsenIQ: “Disruption in the supply chain and increased input costs are now starting to feed through and food prices increased slightly from last month. However low prices on seasonal fresh foods are helping to offset rising prices in ambient food. Whilst non food retailers have so far able to mitigate a lot of the impact, the outlook is for shop price inflation to return over the next few months.”