Shop price inflation slowed more than expected in February, offering tentative relief to households grappling with elevated living costs and providing fresh evidence that broader inflationary pressures may be easing.
New data from the British Retail Consortium (BRC) and market research firm NielsenIQ showed that shop prices rose by 1.1 per cent year-on-year in February, down from 1.5 per cent in January. The deceleration was driven by increased discounting across fashion, health and beauty categories, alongside moderating food price inflation.
The figures land just days before the government’s spring statement, when the Office for Budget Responsibility will update its economic forecasts and assess the outlook for growth and public finances.
The latest retail data adds to signs that price pressures are cooling. Official statistics from the Office for National Statistics showed consumer price inflation fell sharply to 3 per cent in January, moving closer to the Bank of England’s 2 per cent target. That decline was partly attributed to lower food price growth, particularly in staples such as bread, cereals and meat.
Food price inflation remained elevated in February at 3.5 per cent, but that represented a slowdown from 3.9 per cent in January. Fresh food inflation eased slightly, while ambient food inflation, covering items stored at room temperature such as canned goods, coffee and packaged foods, slowed markedly to 2.3 per cent from 3.1 per cent. The BRC said ambient inflation is now at its lowest level in four years, reflecting lower global commodity costs and intense competition among supermarkets.
Non-food prices, including clothing, electronics and household goods, fell by 0.1 per cent year-on-year in February, compared with growth of 0.3 per cent in January. Retailers have leaned heavily on promotions to stimulate demand amid fragile consumer confidence and unpredictable spending patterns.
Helen Dickinson, chief executive of the BRC, described the slowdown as a “welcome relief” but cautioned that prices are still rising overall and many households remain under strain. She warned that cost pressures facing retailers, including wage increases and regulatory changes, could reverse some of the recent progress.
Retailers are closely monitoring the potential impact of the Employment Rights Act, which is expected to increase labour costs. Industry leaders argue that if secondary legislation adds complexity or cost burdens, those expenses may ultimately be passed on to consumers.
Mike Watkins, head of retailer and business insight at NielsenIQ, said competitive pricing has intensified across both food and non-food sectors since the start of the year. “While weak sentiment and difficult trading conditions are making demand unpredictable, shoppers are beginning to see some easing in cost-of-living pressures,” he said.
The retail inflation slowdown comes against a mixed economic backdrop. While recent data has pointed to stronger-than-expected retail sales and a record monthly budget surplus of £30.4 billion, unemployment has climbed to a five-year high and economic growth remains subdued.
For policymakers, the moderation in shop price inflation will be closely scrutinised as they weigh interest rate decisions and fiscal policy. For households, however, the immediate takeaway is more modest: some pressure may be easing, but the cost of living challenge is far from resolved.
