UK shop price inflation cools for first time in 2023

LONDON – Heavy discounting on clothing and furniture pulled down shop price growth in Britain for the first time in 2023, a sign that households may be past the worst of an inflation shock.

Shop price inflation slowed to 8.8 per cent in April from a record high of 8.9 per cent the previous month, according to the British Retail Consortium and NielsenIQ.

However, rises in grocery bills continued to accelerate, hitting a fresh all-time high of 15.7 per cent as ready meals, coffee and fresh produce became more expensive.

The figures feed into the Bank of England’s (BOE) consideration about whether further interest rate increases are needed to curb inflation.

Soaring food prices has kept inflation stubbornly in double digits, fuelling investor bets on more BOE hikes, but retailers say pricing pressure is easing.

“We should start to see food prices come down in the coming months as the cut to wholesale prices and other cost pressures filter through,” BRC chief executive Helen Dickinson said in a report on Tuesday. “Overall shop price inflation eased slightly in April due to heavy Spring discounting.”

It was only the second month of cooling shop price inflation since the start of 2022.

There was a sharp divergence in prices in non-food and food shops. Inflation in non-food retailers slowed to 5.5 per cent in April, from 5.9 per cent.

But both fresh and ambient food costs worsened. Fresh food inflation hit a record 17.8 per cent, while ambient prices climbed 12.9 per cent.

After a surprisingly strong inflation reading in March, markets are betting on the BOE opting for another quarter point increase in its key lending rate at its next monetary policy decision on May 11. Investors are leaning towards the policymakers following up with more hikes, lifting bank rate to 5 per cent by September from 4.25 per cent currently.

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