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Shop price deflation slows

Shop price deflation has slowed to the shallowest rate seen in three and a half years, the latest research has found.

Overall the drop in shop prices decelerated to 0.3% between 5 to 9 June, compared with a 0.4% fall for the same period in May.

This marks the lightest deflation rate seen since November 2013, according to figures from the latest British Retail Consortium (BRC) - Nielsen Shop Price Index.

Deflation of non-food products stood at 1.4%, a marginal improvement on May’s 1.5% deflation. It is static compared with April.

BRC chief executive Helen Dickinson said the figures signal that shop prices are nearing the end of a four-year deflationary trend, asfeed-through from the depreciation of the pound and rising commodity prices continues”.

She also warned that although the headline numbers show prices are still down on last year, they “should not be misunderstood” as the year-on-year numbers belie that prices have been heading upwards for the last six months.

Dickinson said: “The steadying of inflation in June is likely a brief hiatus; resulting from the interplay of short-term influences on pricing, such as good weather delaying mid-season promotions into June and the longer-term competitive pressures constraining the pass through of all costs. We expect shop price inflation to continue trending upwards in coming months.

“The reality is that cost pressures faced by retailers continue to mount. These pressures arise both from market driven increases in the underlying cost of goods and as a result of government policies. There is a limit to the ability of retailers to protect consumers by absorbing these impacts into their margins, as a result further price increases are inevitable.”

Nielsen head of retailer and business insight Mike Watkins said: “With inflation rising in essential goods and services, many households are now seeing their monthly household expenditure come under pressure. While this may add to the uncertainty around discretionary spending, the good news is that shop prices are increasing at a slower rate.”

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