UK shop price inflation slows further in November

(Sharecast News) - Shop prices in the UK continued to decline in November, it was reported on Tuesday, but the rate of deflation slowed, signaling a potential shift in inflationary trends. According to the latest BRC-NielsenIQ Shop Price Index, prices fell 0.6% year-on-year during the first week of November, a slight increase from October's 0.8% deflation and marginally above the three-month average of -0.7%.

Annual shop price growth remained at its lowest since September 2021.

"November was the first time in 17 months that shop price inflation has been higher than the previous month, albeit remaining overall in negative territory," said British Retail Consortium chief executive Helen Dickinson.

"Food prices increased for fresh products such as seafood, which is more vulnerable to high import and processing costs, especially during winter.

"Tea prices also remained high as poor harvests in key producing regions continued to impact supply."

Dickinson said that while coffee prices experienced a momentary dip, price rises were imminent as global coffee prices approached record highs.

"In non-food, while many retailers unwound some of their discounting, there are still many bargains across fashion and furniture.

"Customers looking to upgrade their electricals were able to pick up some great deals in early Black Friday sales."

Non-food prices remained in deflation territory, recording a 1.8% year-on-year drop in November, compared to a 2.1% fall in October.

The figure, which aligned with price trends last seen in mid-2021, was slightly better than the three-month average of -2.0%.

"With significant price pressures on the horizon, November's figures may signal the end of falling inflation," Helen Dickinson added.

"The industry faces £7bn of additional costs in 2025 because of changes to Employers' National Insurance Contributions, business rates, an increase to the minimum wage and a new packaging levy."

Dickinson said retail already operated on "slim margins", adding that the new costs would "inevitably" lead to higher prices.

"If the government wants to prevent this, it must reconsider the existing timelines for the new packaging levy, while ensuring any changes to business rates offer a meaningful reduction for all retailers as early as possible."

Food inflation also showed signs of easing, slipping to 1.8% in November from 1.9% the previous month.

That marked the lowest annual rate since November 2021 and was below the three-month average of 2.0%.

Within the category, fresh food inflation edged higher to 1.2% from October's 1.0%, consistent with the three-month average.

By contrast, ambient food inflation fell sharply to 2.7% in November from 3.1% in October, marking its lowest level since February 2022 and dipping below the three-month average of 3.0%.

Mike Watkins, head of retailer and business insight at NielsenIQ, said shoppers were still being cautious by "shopping savvy" for essentials and holding back discretionary spend, meaning the lower level of inflation should help sentiment ahead of Black Friday promotions.

"And with lower inflation than this time last year, many food retailers are extending offers and discounts to help sales momentum in December."

Reporting by Josh White for Sharecast.com.