Higher prices loom

Period Covered: 02 – 06 August 2021

•  Shop Price deflation eased to 0.8% year-on-year in August compared to July’s decrease of 1.2%. This is a slower rate of decline than the 12- and 6-month average price decreases of 1.5% and 1.2%, respectively.
• Non-food deflation slowed to 1.2% in August, compared to a fall of 1.8% in July. This is a slower rate of decline than the 12- and 6-month average price declines of 2.6% and 1.8%, respectively.
• Food deflation decelerated to 0.2% in August from July’s deflation of 0.4%. This is the fifth consecutive month when Food prices fell. This is below the 12-month average price growth rate of 0.3% and in line with the 6-month average price growth rate of -0.2%.
• Fresh food prices fell for the ninth consecutive month in August, with deflation easing to 0.6% from a decline of 1.0% in July. This is in line with the 12- month average price growth rate of -0.6% and below the 6-month average price growth of -0.9%.
• Ambient food inflation eased to 0.3% in August, down from 0.5% in July. This is the lowest rate of inflation for the category since January 2017. This is below the 12- and 6-month average price increases of 1.5% and 0.8%, respectively.

Helen Dickinson OBE, chief executive of the British Retail Consortium, said: “While it is good news that overall retail prices fell year on year, there was a slight rise in prices on the previous month. There are some modest indications that rising costs are starting to filter through into product prices. Some of the Non-food categories, such as electricals, saw sharp rises in inflation compared to last year, owing to global issues from delayed shipping and shortages of microchips. Food retailers are fighting to keep their prices down as far as possible. But mounting pressures – from rising commodity and shipping costs as well as Brexit-related red tape, mean this will not be sustainable for much longer, and Food price rises are likely in the coming months.

“Low prices are already under threat, and now the HGV driver shortage has created an additional problem with a shortfall of 90,000 drivers. Disruption has been limited so far, but in the run up to Christmas the situation could get worse, and customers may see reduced choice and increased prices for their favourite products and presents. The government must act swiftly and rapidly increase the number of HGV driving tests taking place, provide temporary visas for EU drivers, and make changes on how HGV driver training can be funded. Without government action, it will be the British consumers who will pay the price.”

Mike Watkins, head of retailer and business insight, NielsenIQ: “The good news for shoppers is that shop price inflation remains below consumer price inflation and any moderate increases in prices are being driven by wider economic conditions and seasonal supply changes. With shoppers now returning from their summer holidays many will be reviewing their household budgets. So the next few months will be an important time for retailers to keep prices stable by absorbing as much of any increase in their supply chain costs as possible.”