UK shop prices slow down amid supply chain turmoil

Shoppers expect inflation to rise as the fall in over-the-counter prices slowed last month, according to new figures.

The August BRC-Nieslen IQ Shop Price Index revealed that shop prices fell 0.8% year-on-year.

But this is significant from the 1.2% deflation in July, amid concerns that supply chain disruptions are increasing retailer costs that could pass some of this cost on to customers. It represents deceleration.

Helen Dickinson, Chief Executive Officer of the British Retail Consortium (BRC), said:

“There are some conservative signs that rising costs are beginning to permeate product prices.”

Non-food deflation slowed from 1.8% in July to 1.2% in August.

Some non-food categories, such as appliances, report inflation rates have risen sharply compared to last year due to “global problems due to shipping delays and a shortage of microchips.”

Meanwhile, food prices slowed from a 0.4% drop last month and fell 0.2% this month.

Food retailers are fighting to keep prices down, but are under pressure from “rising commodity and shipping costs, and Brexit-related bureaucracy,” Dickinson said.

She added: “Low prices are already under threat, and the shortage of HGV drivers is currently causing the additional problem of a shortage of 90,000 drivers.

“So far, the turmoil has been limited, but things can get worse for Christmas, and customers can have fewer choices of their favorite products and gifts, and prices can go up.

“Government needs to act swiftly, rapidly increase the number of HGV driving test conducted, provide EU drivers with temporary visas, and change the way HGV driver training is funded.

“Without government action, it would be the UK consumer to pay the price.”

Mike Watkins, Nielsen IQ Retailer and Head of Business Inflation, said:

“Now that shoppers are back from summer vacation, many are reviewing their household budgets.

“Therefore, the next few months will be an important time for retailers to stabilize prices by absorbing as much of the increase in supply chain costs as possible.”

By Henry Saker-Clark