Recent data from the British Retail Consortium (BRC) highlights a trend that many retailers have been dreading: consumers are cutting back on their spending. The combination of a cost of living crisis and unseasonably poor weather has significantly impacted consumer behavior, leading to a slowdown in spending.
Shop Price Inflation and Non-Food Price Deflation
The BRC report reveals that annual shop price inflation remained unchanged at 0.2% in July, marking the lowest rate since October 2021. Despite this stabilization, non-food price deflation persisted at 0.9% as retailers continued to lower prices in an effort to attract cost-conscious consumers.
Food Inflation Trends
Food inflation saw a modest decline, with the rate slowing to 2.3% in July, down from 2.5% in June. This is below the three-month average rate of 2.7% and represents the lowest level of food inflation since December 2021. The trend of easing inflation in the food sector is a welcome relief for many households.
- Fresh Food: Inflation slowed to 1.4% in July from 1.5% in June, below the three-month average of 1.6%, marking the lowest rate since November 2021.
- Ambient Food: Inflation decelerated to 3.6% in July from 3.9% in June, also below the three-month average of 4.1%, and the lowest rate since April 2022.
Retail Insights
Helen Dickinson, Chief Executive of the BRC, noted, “Shop Price Inflation in July remained unchanged on the previous month. Non-food price deflation continued, albeit at a slower rate than June. Holidaymakers could pick up bargain summer wear and summer reads as clothing and footwear prices fell for the seventh consecutive month amidst persistent weak demand, and the prices of books fell.”
Dickinson also pointed out the beneficial effects of declining global food commodity prices, which have helped reduce food inflation over the past seven months. However, she cautioned about potential future pressures, “With the outlook for commodity prices remaining uncertain due to the impact of climate change on harvests domestically and globally, as well as rising geopolitical tensions, renewed inflationary pressures could be lurking just over the horizon.”
Economic and Consumer Confidence
Mike Watkins, Head of Retailer and Business Insight at NielsenIQ, provided additional context, “As we cycle through high inflation comparatives from a year ago we can expect a lower level of inflation for a number of months to come. But with the squeeze on household finances continuing, consumer confidence only slowly improving, and poor summer weather so far, retailers will still need to keep any price increases to a minimum to encourage shoppers to spend.”
Conclusion
The BRC data paints a picture of cautious consumer behavior in the face of ongoing financial pressures and adverse weather conditions. While the easing of food inflation offers some respite, the broader economic challenges and potential future pressures underscore the need for retailers to remain adaptable and responsive to consumer needs.
