A sharp fall in food inflation

UK shop price index declines 1.3 per cent in April, according to the British Retail Consortium and t

Retailers are holding back – or even cutting – prices. Credit: Getty Images

The UK's overall shop price index (SPI) fell to 1.3 per cent in April, down from 1.5 per cent the previous month, according to the British Retail Consortium (BRC) and the research firm Nielsen.

Food inflation slowed to 4.3 per cent from 5.4 per cent. Fresh food inflation slowed to 3.8 per cent from the ten-month high of 4.6 per cent in March, while the ambient food category also reported a sharp fall in its inflation rate to 5.2 per cent, from 6.6 per cent the previous month.

Non-food items reported deflation of 0.5 per cent in April from 0.9 per cent in March. Deflation in the clothing and footwear category slowed to 5.4 per cent in April from 6.5 per cent in March.

Deflation in the furniture and floor-coverings category reported an increase of 1.4 per cent in April, while in the books, stationery and home-entertainment category, it slowed to 0.5 per cent from 1.1 per cent the previous month.

Inflation in DIY, gardening and hardware reached 3.8 per cent from 2.7 per cent in March. Annual deflation in the electricals category slowed to 3.7 per cent in April from 4.7 per cent in March, while deflation in the clothing and footwear category slowed to 5.4 per cent (March: 6.5 per cent). The health and beauty category reported a rise in inflation to 2 per cent from 1.6 per cent the previous month.

Stephen Robertson, director general of BRC, said:

After last week’s official return to recession, these figures give customers some reasons to be cheerful. Fuel, utilities and even stamps are much more expensive than they were but retailers are holding back or actually cutting prices. Food inflation dropped to where it was before March’s sudden rise and non-food goods have now been cheaper than a year ago for three months in a row.

This time last year, rocketing animal feed and ingredients costs were driving food prices up sharply. Now, easing world prices for commodities such as wheat and sugar are working through to the shops.

Dairy products, margarine and fish are among the foods seeing much lower inflation than last year. Meanwhile, retailers continue to discount hard but often with vouchers for money off your whole bill or your petrol rather than off individual items. Where food prices go next is hard to predict. Competition will remain intense in the face of weak demand from customers but some commodity price rises – soya bean and corn – are in the pipeline.

Promotions remain essential to generating sales of goods that are not immediate needs. Clothing, shoes, electricals and furniture were all cheaper than this time in 2011 but margin-slashing discounting cannot be sustained forever.

Mike Watkins, senior manager of retailer services at Nielsen, said:

The fall in the shop price index for food during April is good news for shoppers but is perhaps not a surprise. The supply chain continues to be affected by changes in commodity prices, global demand and worldwide harvests and of course the weather. Retailers promotional spend on offers also remains high at 35 per cent of sales in supermarkets – which is a similar level to this time last year when inflation was increasing and consumer confidence had weakened. So, to help shoppers manage household budgets, retailers continue to promote heavily and this provides further savings.