For the first time in almost six years the price of non-food goods has risen, albeit slowly, as cost pressures which had been building in the supply chain over the past few years fed through into prices.
According to the latest figures from Nielsen and the British Retail Consortium (BRC), this adds to gradual ongoing rises in food prices, resulting in the highest overall shop price inflation since March 2013.
Among the key data points are:
- Shop Price inflation accelerated in February to 0.7%, up from 0.4% in January. This is the highest inflation rate since March 2013.
- Non-Food prices rose by 0.2% year on year in February compared to the January decrease of -0.2%. This is the first time that Non-Food have been inflationary since March 2013.
- Food inflation inched up slightly in February to 1.6%, up from 1.5% in January.
- Fresh Food inflation accelerated to 1.7% in February, up from 1.2% in January. This is the highest rate since January 2018.
- Ambient Food inflation eased in February to 1.5%, down from 1.9% in January. This is the lowest inflation rate since May 2018.
The key driver of the upward movement in year on year Shop Price Inflation in February was Non-Food, while Food price inflation overall was broadly stable.
In its commentary, the BRC points out February is usually a month when Non-Food retailers introduce new products at full price, after a January of clearing stock and deep discounting. Therefore, it’s no surprise that Non-Food prices are higher month on month.
In contrast, Non-Food prices are higher year on year for the first time in six years. This, the BRC says, reflects the ongoing slow release of significant cost pressures which have built up in the supply chain over the last two years, notably from the currency depreciation in 2016 and the rise in oil prices last year.
However, Non-Food prices remain below levels seen in 2016. And, given weak discretionary spending and intense competition, it is likely that heavy discounting will be back.
Mike Watkins, Head of Retailer and Business Insight at Nielsen, said: “Whilst shop prices have moved upwards slightly in February, economic growth is slowing and there is still weak retail growth. So, for as long as shoppers continue to be cautious, it will be difficult for the industry to pass on in full any cost price increases coming through the supply chain, particularly as around half of households are still reluctant to spend and many have concerns about the economy. Retailers will need to simplify the shopper experience, improve customer engagement and deliver good value for money to encourage shoppers to spend.”