Shop prices fell 1% in February compared with the same month in 2016, driven by a decline in the non-food sector.
The average prices of non-food items fell by 1.8% year on year, although this was an easing from the 2.3% decline in January, the British Retail Consortium (BRC) and Nielsen Shop Price Index show. Food prices rose by 0.4% in February – the first time they have been in inflation since April 2016.
Helen Dickinson, chief executive of the BRC, said February continued “a trend of year-on-year price falls that has lasted nearly four years”.
She added: “However, it is clear that the significant underlying cost pressures, which have been building over the last year are beginning to filter through into shop prices.
“For the time being, consumers continue to benefit from an annual fall in non-food prices, which were down 1.8% on the previous year. However, the rate of deflation has eased considerably from a monthly perspective, which can be explained in part by an end to the promotional activity in January, after a weak festive sales performance in some non-food categories.
“Looking further ahead, retailers, who operate in a highly competitive market with narrow margins, will be increasingly hard pushed to protect their customers from the inevitable impact of these rising cost pressures. We can therefore expect this impact to start manifesting in shop prices over the course of the year.”
Mike Watkins, head of retailer and business insight at Nielsen, added: “At the moment consumer sentiment around spending intentions is strong, so we don’t anticipate any significant change on retail spend over the next few months, even if shop price inflation gains more momentum.”