Price Declines in UK Retail

LONDON (Reuters) – Prices in British shops fell at the fastest pace in over three years in September, according to the British Retail Consortium (BRC) on Tuesday. This decline indicates that the inflation squeeze on consumers is easing.

Annual shop price deflation reached 0.6% for the 12 months ending in September, marking its weakest since August 2021, and a more significant drop compared to 0.3% in the previous month.

This represents the seventh reduction in price growth within nine months.

Non-food deflation decreased to 2.1%, down from a drop of 1.5% in August.

Helen Dickinson, BRC boss, noted, "Easing price inflation will certainly be welcomed by consumers, but ongoing geopolitical tensions, climate change, and government-imposed regulatory costs could all reverse this trend."

Food price inflation rose to 2.3% from 2.0%, attributed partly to poor harvests in key farming regions resulting in higher prices for cooking oil and sugar.

Official data indicated that consumer price inflation remained at 2.2% for the second consecutive month in August, significantly lower than the 41-year high of 11.1% recorded in October 2022.

However, services inflation, a critical measure of underlying inflation pressure monitored by the Bank of England, saw an uptick.

The central bank is anticipated to lower borrowing costs in November, having maintained its key interest rate at 5% in September.

Policymaker Megan Green expressed concerns last month regarding the risk that weak consumer demand could rebound more than the Bank has expected.

Consumer surveys indicate that many households are still wary about possible tax increases in Finance Minister Rachel Reeve's upcoming annual budget scheduled for later this month.