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Shop prices fall in June as supermarkets ‘battle’ to keep prices low

A woman carries bags of shopping along Regent Street in London, England. Photo: David Cliff/NurPhoto via Getty Images
A woman carries bags of shopping along Regent Street in London, England. Photo: David Cliff/NurPhoto via Getty Images

Shop prices fell in the first week of June but they are not likely to last, new data revealed.

The British Retail Consortium (BRC)-NielsenIQ shop price index showed shop price deflation accelerated to 0.7% year-on-year in June compared to May’s decrease of 0.6%.

Non-food deflation accelerated to 1% in June, compared to a fall of 0.8% in May.

Food deflation slowed to 0.2% in June from May’s deflation of 0.3%, while fresh food prices fell for the seventh consecutive month in June, although deflation slowed to 0.7% in June from 1% in May.

Helen Dickinson, CEO at BRC, said the fall in food prices “is a testament to supermarkets battling to keep prices low for their customers.”

But she said retailers’ costs are continuing to mount due to a host of reasons: global food price increases, Brexit red-tape, COVID-19 related supply chain disruption, raw commodity shortages and increased shipping and petrol costs.

Chart: BRC-NielsenIQ shop price index
Chart: BRC-NielsenIQ shop price index

“The increasing cost burden on retailers may be passed onto the consumer, threatening price rises as the pressure mounts in the months ahead, especially with additional Brexit checks this autumn.”

She urged the government to minimise the cost impact on consumers by ensuring that the new checks and documentation requirements this autumn avoid adding further friction to the import of goods.

Meanwhile Mike Watkins, head of retailer and business insight, NielsenIQ said that shop prices staying in negative territory despite the recent rise in the consumer price index highlights "the competitive retail landscape in the UK".

But he warned that with four in 10 shoppers watching their spending more than they were before the pandemic, millions of households are going to see their budgets squeezed should prices start to rise.

Read more: UK consumer confidence holds steady in June as inflation threat looms

It was reported last week that consumer sentiment in the UK remained stable at its highest level since the start of the coronavirus pandemic in June amid the gradual reopening of the economy after months of lockdown, and looming inflation.

According to GfK’s long-running consumer-confidence barometer, June’s reading stood at -9, unchanged from April. However, this was below the -8 consensus forecast polled by Wall Street Journal economists, while economists polled by Reuters had forecast a small rise to -7.

It came as UK prime minister Boris Johnson announced a four-week delay to the final stage of Britain's roadmap out of lockdown this month as cases of the Delta variant, which was first detected in India, began to rise.

Watch: What is a V-shaped economic recovery?