Food price inflation is holding steady and remains at a two-year low at 3.1%, according to figures out today from the British Retail Consortium (BRC) and Nielsen.
Overall shop price inflation slowed marginally to 1% in September from 1.1% in August, while food inflation was unchanged at 3.1% in September for the third consecutive month. Deflation in non-food increased to 0.2% from 0.1% in August.
Stephen Robertson, BRC’s director general, said: “Falling prices for non-food goods and stable food inflation are slowing overall shop price rises.
“Food inflation remains at a two-year low for the third month running despite inflationary pressures building up in the supply chain from rises in global commodities such as wheat and soyabeans.
“These shop price figures show retailers are holding back much of the impact as they battle it out for every bit of spending available from hard-up customers. Promotions, including multi-buy offers, fuel coupons and price matching are commonplace and helping to keep grocery bills down, while non-food prices have now been cheaper than a year ago for eight months in a row as prices of furniture, electricals and clothing are cut to generate sales.”
Mike Watkins, senior manager, retailer services, Nielsen, said: “Over the last month, we have seen some welcome stability in food retailing and sales growths have improved a little compared with the early summer.
“Retailers have maintained the high levels of promotional activity at 35% of sales and food inflation remains at a two-year low point at just over 3%. This will be helping shoppers to plan with more confidence when juggling their household budgets.”
Shop price inflation has been relatively stable since the start of the year, averaging just 1.2%, which is in part due to non-food deflation for the last eight months. While food price rises have been relatively high over the same period (3.9%), they have fallen 2.3 percentage points since their peak of 5.4% in March 2012. The “fiercely competitive nature” of the retail industry has meant that consumers have benefited from lower prices at the expense of retailers’ margins.
The recent rise in commodities still remains a major upward risk to food prices. The Reuters-Jefferies/CRB index, a weighted commodities benchmark, has appreciated 14% in the three months to the end of the September survey period.
The stability of food inflation in September was a welcome surprise to many analysts who had expected the large rises in commodity prices to start feeding through to consumer prices.
The Thomson/Reuters-CRB Index, a weighted commodities benchmark, has risen 14% over the last three months. This is still a major upward risk to prices in the coming months however, with consumer spending remaining subdued, retailers will continue to compete on price and promotions which will come at the expense of their margins, said the BRC.
A recent report by DEFRA showed that food prices in the UK were lower than many other European countries due to the fiercely competitive nature of the industry. It is also important to note that around 35% of food bought from supermarkets is on promotion.
In September, fresh food inflation accelerated to 3.0% from 2.5% in August. Upward pressure was exerted by the vegetables and fruit categories, the former reporting a sharp rise in its inflation rate and the latter returning to inflationary territory.
This outweighed slowing inflation in the oils and fats, milk cheese and eggs and fish categories.
On a month-on-month basis, prices rose 0.4% in September after falling by the same amount in August.
Ambient food inflation slowed to 3.2% in September from 4% in August, the lowest inflation rate since April 2010. All four sub-categories reported slowing inflation notably non-alcoholic beverages, breads and cereals and the category which contains sugar jam and chocolate.
On a month-on-month basis, prices fell 0.4% after rising 0.5% in August.