Record fall in fresh food prices drives retail deflation

May’s drop in shop prices reinforces view that UK inflation will be low for rest of year

Prices in British shops have moved into their third year of decline as a result of widespread supermarket discounting and cheaper fresh food, according to new industry figures.

The British Retail Consortium (BRC) said shop prices in May were down 1.9% on last year’s levels, unchanged from April’s rate of decline and the 25th straight month of deflation. The fall will reinforce expectations that the broader official measure of inflation in the UK will remain low for some months to come after turning negative in April.

The BRC found food prices again fell 0.9% in May while non-food deflation held at 2.5%.

Within those categories, fresh food fell at a record pace of 1.9% thanks to meat, milk, cheese and eggs all being cheaper than a year ago, according to the BRC report with market research company Nielsen. Comparable records began in December 2006.

In non-food, the BRC said deep deflation was recorded in clothing and footwear, electricals and books, stationery and home entertainment. Health and beauty remained in inflationary territory.

Posted by: Authenticate 01/06/2015