Shop price inflation drops to lowest level in two years in relief for Brits

27 February 2024 , 00:01

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Shop price inflation has dropped to the lowest level in two years (Image: Getty Images/iStockphoto)

Shop price inflation has eased to a near two-year low, according to welcome figures out today.

The average charged in shops rose 2.5% year-on-year in February, said trade body the British Retail Consortium (BRC) and number crunchers NielsenIQ. That was down from 2.9% in January and the lowest since March 2022. The sharpest fall was in the price of food, which rocketed in the depths of the cost of living crisis.

Inflation is a measure of how the price of goods and services has changed over time - so when it is higher, it means costs are rising faster compared to this time last year. Today's announcement shows that prices are still rising in shops but at a much lower level than they were.

While average food prices were still 5% higher year-on-year, that was down from 6.1% in January. Fresh food inflation slowed from 4.9% to 3.4%, and “ambient” food from 7.7% to 7.2%, as retailers saw costs cool and amid competition between grocers. Non-Food inflation was unchanged at 1.3%, with the price of furniture, electricals, and health and beauty products rising but clothing continued to fall.

Helen Dickinson, BRC chief executive, said: “Easing supply chain pressures have begun to feed through to food prices, but significant uncertainties remain as geopolitical tensions rise. Prices of non-food goods will be more susceptible to shipping costs, which have risen due to the re-routing of imports around the Cape of Good Hope. Domestically, retailers face a major rise to their business rates bills in April.”

Shop prices 'are yet to peak and will remain high' as inflation hits new heights

Mike Watkins, head of retailer and business insight at NielsenIQ, said: “Shop price inflation has slowed and the underlying trend in prices will be downwards over the next few months. Since the start of the year, food retailers in particular have reduced prices as well as passing on price cuts coming through supply chains. For high street retailers faced with weaker demand, keeping prices stable over the next few months will be key to encourage customers to spend.”

Lower shop prices will be welcome news for Chancellor Jeremy Hunt ahead of next week’s Budget. The overall rate of inflation dropped to 4% in January, the Office for National Statistics announced recently. That remains double the Bank of England’s 2% target, however, prompting speculation about when it will start cutting interest rates. Separate ONS data on Monday showed household costs in general rose 5% in the year to December, down from 8.3% in September.

Graham Hiscott