Retailers fight to keep prices low amidst rising costs

New data from the British Retail Consortium (BRC) has shown that furniture and health and beauty products are among the items that have risen most in recent weeks, driving an increase in shop prices of 1.2% year on year in May, with the rate slightly above the three-month average of 1.1%.

High oil prices and the ripple effect of the prolonged closure of the Strait of Hormuz shipping channel were among the factors in the research

Customers can still find bargains on TV and audiovisual equipment, it said, as retailers target football fans getting ‘World Cup ready’  for this summer’s tournament in the US, which starts next month.

Intense competition between supermarkets has also kept a lid on food price inflation, which fell to 2.7% in May, below the longer-term average of 3.1%.

However, while some promotions were likely to be extended over the summer as retailers compete hard for consumers’ disposable income, the trade body voiced doubts about the broader outlook for cost-conscious consumers.

The BRC noted that competition among UK supermarkets has pushed food inflation to its lowest level in a year. It said discounting resulted in food inflation falling from 3.1 per cent in April to 2.7 per cent in May.

Helen Dickinson, Chief Executive of the BRC, said, “Shop price inflation edged up in May as non-food prices rose. Furniture and health & beauty saw the sharpest increases, driven by rising raw material and shipping costs. Customers were still able to find bargains, with prices for TVs and audiovisual equipment falling as retailers help people get World Cup ready. Households did benefit from food inflation falling to its lowest level in a year, as intense competition among supermarkets continued to deliver value and savings.

“While retailers work hard to keep prices down for customers, they continue to face significant cost pressures, including higher energy bills and disruption linked to the conflict in Iran. Businesses cannot absorb these costs indefinitely, which risks pushing prices higher in the months ahead. To help protect households, the government should take action to reduce business costs. Reducing the non-commodity charges, taxes and levies that make up more than two-thirds of energy bills, and cutting red tape would help keep inflation down.”

Mike Watkins, Head of Retailer and Business Insight, NIQ, said “Food inflation is still around the same level as a year ago, helped by supermarkets maintaining promotions after Easter, but prices are now starting to creep up for non-food after a period of deflation. With external inflationary pressure building and many households cautious about spending, we can expect promotions across all of retail to increase over the summer months.”

 

	Overall SPM		Food		Non-Food
% Change	On last year	On last month	On last year	On last month	On last year	On last month
May-26	1.2	0.5	2.7	-0.1	0.5	0.8
Apr-26	1.0	-0.2	3.1	0.5	-0.1	-0.6