Retailers and consumers are confronting renewed inflationary pressure, after the British Retail Consortium (BRC) and NIQ reported shop price inflation of 1.4 % year on year in September — up from 0.9 % in August.
While food price inflation remains strong, the key change lies in non-food categories, where prolonged deflation appears to be ending.
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Non-food deflation nears its end
According to the BRC’s Shop Price Monitor, non-food inflation rose to –0.1 % year on year in September, compared with –0.8 % in August. This shift suggests that prices in non-food sectors such as DIY and gardening are rising again after a sustained period of deflation.
Helen Dickinson, Chief Executive of the BRC, observed that “a year and a half of non-food deflation looks set to come to an end, as inflationary pressures spread beyond food.”
Although non-food prices are still marginally lower than a year ago, the reversal in trend marks a potentially significant turning point in retail pricing dynamics.
That said, some back-to-school categories saw discounts, with retailers promoting laptops and other electronics ahead of the new term.
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By GlobalDataFood inflation steady but elevated
Food inflation held steady in September at 4.2 %, the same rate as in August.
Breaking down food categories, fresh food inflation remained at 4.1 %, while ambient food prices were up 4.2 % on the year.
Dickinson noted that despite the stability, input price pressures such as rising energy and labour costs continue to squeeze margins in agriculture, particularly affecting dairy and beef sectors.
Longer term, the BRC has flagged concerns that further cost pressures could push food inflation higher later in 2025.
Retail sector under tension from cost burdens
Retailers are navigating a difficult balance between absorbing rising costs and maintaining sales volume. Dickinson warned that “households are finding shopping increasingly expensive” as higher national insurance, wage growth and energy costs feed through to consumer prices.
Adding to pressure, a new packaging tax set to take effect in October could further push costs upward.
Mike Watkins, Head of Retailer and Business Insight at NIQ, said sustained inflationary pressures are likely to drive more promotions and deals in the short term, as consumers become more price sensitive.
Meanwhile, consumers’ confidence is under strain: in September, the BRC reported that personal financial sentiment weakened, with people rating the economy more negatively than the previous month.
From a macro perspective, the escalation in shop price inflation feeds into broader policy debates. The wider Consumer Prices Index (CPI) reached 3.8 % in August, well above the Bank of England’s 2 % target.
Some central bank officials have cautioned that persistent inflation may delay rate cuts.
As shop price inflation accelerates and non-food deflation recedes, the retail landscape is under renewed pressure.
How retailers and policymakers respond in the coming months will be crucial to how shoppers and businesses alike weather the next phase of the cost-of-living challenges.
