Biggest fall in fresh food inflation

Posted by Isobel Drake on 4th June 2009

Retail researchers British Retail Consortium and Nielsen in the UK have reported the lowest food inflation rate of the year, falling from 1.4 per cent in April, to 1.3 per cent in May. This is the second consecutive month that inflation has slowed down.

The report comes from the May BRC-Nielsen Shop Price Index (SPI), and Stephen Robertson, BRC’s Director General said results were largely driven by the biggest fall in fresh food inflation in the UK, since the index began in December 2006.

“Food inflation has been falling since March, suggesting that the worst food price rises are behind us. Significant falls in the cost of commodities such as oil, and the pound’s recent stabilisation have helped ease inflationary pressures,” he said.

“Big discounts and lower VAT mean non-food goods are cheaper than a year ago for the sixth consecutive month with prices for electricals and clothing dropping most.

Mike Watkins, Senior Manager of Retailer Services, Nielsen says it appears that the pound’s recent depreciation has had most of the effect it’s going to on food prices and the benefits of lower commodity prices can be seen working through to shop prices.

“With summer approaching, supermarkets are using high levels of promotions on seasonal lines to draw in customers which are also helping keep food prices lower,” he said.

“Non-food prices fell again but more slowly, suggesting that exchange rate depreciation is continuing to influence the prices of many imported non-food products,” Mr Watkins said.