UK’s major retailers reported the first monthly decline in shop prices in two years in July, as they offered significant discounts to attract customers during the unseasonably wet weather.
The British Retail Consortium (BRC) revealed that shop prices dropped by 0.1% compared to June.
Additionally, the annual shop price inflation rate, compiled in collaboration with NielsenIQ, decreased to its lowest level of the year, reaching 7.6% last month, down from 8.4% in June, The Guardian reported.
Clothing and footwear witnessed substantial price reductions, as retailers launched bigger discounts to encourage shoppers to invest in summer outfits despite the heavy rainfall and floods across much of the country.
Moreover, food price inflation also slowed in July, reaching its lowest rate of 2023, thanks to decreased costs of staple items like oils, fats, fish, and breakfast cereals.
This helped alleviate some financial pressure on cash-strapped consumers.
The annual price growth for food products fell for the third consecutive month to 13.4%, lower than June’s 14.6% figure and the lowest since December last year.
While the July shop price figures provide some optimism, the BRC has issued a warning that retailers might encounter rising input prices in the coming months, particularly for food, due to international events.
Recent global food commodity price increases, particularly for wheat and corn, were influenced by Russia’s decision to terminate the Black Sea grain deal, affecting Ukrainian cereals reaching world markets.
Furthermore, rice prices rose after India banned exports of non-basmati white rice in an effort to control domestic inflation following heavy rain’s impact on domestic crops.
Helen Dickinson, the chief executive of the BRC, highlighted that additional supply chain issues may lead to increased input costs for retailers in the future.
She emphasised that food prices are expected to fall at a slower rate compared to other goods.
To address this situation, Dickinson urged the government to freeze business rates from April next year to avoid adding an extra £400 million of pressure on prices.
Though the retail industry, particularly food retailers, has faced pressure due to the rising cost of living, overall price rises appear to be slowing down.
The UK’s annual inflation rate declined more than expected in June to 7.9%, primarily driven by a significant drop in petrol costs.
The Office for National Statistics reported the first larger-than-expected fall in inflation since the beginning of the year, leading to improved forecasts on interest rate hikes by the Bank of England for the near future.
Mike Watkins, the head of retailer and business insight at NielsenIQ, suggests that discretionary consumer spending is expected to rise because of the summer holidays and the improving inflation outlook.
However, shoppers are adapting their strategies, opting to shop at different retailers, purchasing lower-priced items, delaying spending, or making purchases during promotions. This consumer behaviour is likely to continue, he said.