Market Analysis

Prices in British shops increased at the joint-slowest rate since October 2021 this month, driven down by reductions in non-food item costs despite continuing rises in food prices, according to the British Retail Consortium on Tuesday.

Shop prices in July were, on average, 0.2% higher than a year ago, matching June's annual increase and tying for the lowest since October 2021.

Food prices saw a 2.3% increase, the smallest rise since December 2021, while non-food prices decreased by 0.9%.

"Holidaymakers could find bargain summer clothing and books, as prices for apparel and footwear dropped for the seventh consecutive month amid persistently weak demand, and book prices also fell," BRC Chief Executive Helen Dickinson stated.

On Monday, the Confederation of British Industry reported that retailers experienced a decline in sales this month due to poor weather and challenging trading conditions.

Many Britons continue to feel the financial strain following a surge in inflation in 2022 and 2023, with wages only recently beginning to recover lost ground.

Headline consumer price inflation, targeted by the Bank of England, held steady at its 2% goal in June but is expected to rise as the impact of last year’s energy price drops fades from annual comparisons.

The BoE, which may cut interest rates on Thursday, is particularly concerned about services price inflation, which was 5.7% in June, significantly above the central bank's forecast.

However, Dickinson cautioned that food prices might also increase as the effects of last year's decline in commodity prices dissipate and climate change adversely affects harvests due to unusually wet weather in England and extreme heat elsewhere.

The BRC's data was collected by NielsenIQ between July 1 and July 7.

Paraphrasing text from "Reuters" all rights reserved by the original author.