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UK Retail Prices Show Potential Shift as Inflation Continues
In November, the UK witnessed a decline in shop prices; however, this drop is insufficient to conclude a streak of 17 months marked by falling shop inflation. Retailers are expressing concerns over the likely increase in prices for consumers ahead.
Data from the British Retail Consortium (BRC) and NielsenIQ Shop Price Index indicated that overall shop prices fell by 0.6% in November when compared to the same month last year. While this decline is an improvement from October’s 0.8% year-on-year drop, it reflects the first month-on-month increase in shop inflation after a prolonged period of decrease. This trend could indicate a forthcoming rise in retail prices.
In terms of food, fresh product prices experienced a slight increase of 1.2% compared to November 2023, up from 1% in October. Major contributors to the rising prices include seafood, which is burdened by elevated import and processing costs during the colder months, and tea, affected by subpar harvests in vital growing regions. Although coffee prices experienced a minor downturn, they are anticipated to rebound given the surge in global bean prices approaching record levels. Notably, broader food inflation slowed to 1.8% in November, a slight decrease from 1.9% in October.
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On the other hand, prices in the non-food sector continued their trend of deflation, decreasing by 1.8% year-on-year, although this represents an improvement from the 2.1% drop observed in October. Many retailers have reduced their discounting strategies, yet shoppers can still find attractive deals across various categories, including fashion, home furnishings, and electronics, as many outlets prepare for early Black Friday sales.
BRC chief executive Helen Dickinson commented on the significance of the November figures, stating, “This marks the first instance in 17 months where shop price inflation has reflected an uptick compared to the preceding month, all while being overall negative.”
She also raised concerns about upcoming price pressures, noting, “With considerable cost increases expected, these figures may signal a shift away from declining inflation.” Furthermore, she highlighted that the retail industry might incur an additional £7 billion in costs in 2025 due to alterations in national insurance contributions, updated business rates, a rise in minimum wage, and the introduction of a new packaging levy. “Given that retailers already work with slim profit margins, these heightened expenses will likely translate into increased prices for consumers,” she added.
Mike Watkins, who oversees retailer and business insights at NielsenIQ, remarked that consumer behavior reflects continued caution, with individuals primarily focusing on necessary purchases while curbing discretionary expenditure. “Shoppers are demonstrating thriftiness concerning essentials and being selective with non-essential spending; thus, the reduced inflation should bolster consumer sentiment as Black Friday promotions near,” he noted.
Additionally, he mentioned that many food retailers are prolonging promotions and discounts to stimulate sales momentum as December approaches, aided by the relatively lower inflation compared to the previous year.
An uptick in energy costs has driven UK inflation to its apex in six months. The inflation rate, which gauges price fluctuations over extended periods, rose beyond expectations to 2.3% in the year concluding in October, an increase from 1.7% in September.
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Source
uk.finance.yahoo.com