LONDON (Reuters) – British shop prices rose at their slowest pace in nearly three years last month, according to industry figures that underscore the extent to which inflation is slowing even if Prime Minister Rishi Sunak is unlikely to see much benefit in this week’s national election.
Annual shop price inflation slowed to 0.2% in June from 0.6% in May, the smallest increase since October 2021, the British Retail Consortium said on Tuesday.
Non-food prices fell 1.0% year-on-year after a 0.8% decline in May – helped by TV promotions coinciding with the Euro 2024 football tournament – while food inflation slowed for the 14th straight month to 2.5% from 3.2%.
“This will be useful for shoppers as they plan their household budgets for essential goods and services,” said Mike Watson, head of retail and business insights at Nielsen IQ, which provides data to the British Retail Council.
“Given the uncertainty around discretionary spending, we expect intense market competition to keep price increases to a minimum this summer.”
Sunak has sought to claim credit for a fall in headline inflation, which topped 11% in 2022 and returned to the Bank of England’s 2% target in May, but opinion polls suggest his Conservative party will lose heavily to the opposition Labour Party in Thursday’s election.
The Bank of England is assessing whether price pressures have eased enough to cut interest rates for the first time since 2020. However, with service sector inflation nearing 6%, it remains unclear when it might make that move.
Investors see a 60% chance of the Bank of England cutting interest rates to 5.0% from 5.25% on August 1.
BRC chief executive Helen Dickinson said investment by retailers to improve their operations and supply chains was keeping prices from rising. She urged the next government to reform cost burdens such as the business rates tax on commercial property and the apprenticeship levy, which employers say are inflexible.
(Reporting by William Schomberg; Editing by Chizu Nomiyama)