UK inflation remained at 2.8% in the 12 months to May, as slower growth in food prices offset higher transport costs, according to the latest figures from the Office for National Statistics (ONS).
The data suggests that competitive pricing by retailers is continuing to help limit inflation despite rising costs across parts of the supply chain.
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The Consumer Prices Index (CPI), the Bank of England’s target measure of inflation, was unchanged from April. Consumer Prices Index including owner occupiers’ housing costs (CPIH) also remained steady at 3.0%.
Separate figures from the British Retail Consortium (BRC) show that shop price inflation remained relatively subdued in May, even as retailers faced higher energy costs, raw material prices and disruption to international shipping routes.
Food prices ease
The ONS said food and non-alcoholic beverage inflation slowed to 2.2%, the lowest annual rate since December 2024. Lower food inflation helped offset continued increases in transport costs, including higher prices for air travel, fuel and vehicle-related expenses.
The latest BRC-NIQ Shop Price Index showed overall shop price inflation rose slightly to 1.2% year on year in May from 1.0% in April. Food price inflation, however, eased to 2.7%, its lowest level in a year, while fresh food inflation also continued to slow.
Helen Dickinson, chief executive of the BRC, said households “benefited from food inflation falling to its lowest level in a year” as “intense competition among supermarkets continued to deliver value and savings.”
The figures suggest retailers are still absorbing part of the cost increases rather than passing them fully on to consumers.
Retailers face higher costs
Although food inflation eased, the BRC said non-food prices increased as furniture and health and beauty products became more expensive because of rising raw material costs and higher shipping charges.
Dickinson said retailers were “working hard to keep prices down for customers” despite facing “significant cost pressures,” including higher energy bills and disruption linked to conflict affecting global supply chains.
She warned that businesses “cannot absorb these costs indefinitely,” adding that this could place further upward pressure on prices if operating costs continue to rise.
The ONS also noted that transport remained one of the largest contributors to inflation during the month, balancing out the downward effect from slower food price growth.
Outlook remains uncertain
Retail pricing remains considerably lower than overall consumer inflation, reflecting intense competition across supermarkets and many non-food categories.
Mike Watkins, head of retailer and business insight at NIQ, said retailers are continuing to balance rising operating costs with consumers’ sensitivity to prices. He noted that shoppers are still benefiting from competitive pricing, even as businesses deal with higher costs across supply chains.
While the latest inflation figures may ease immediate pressure on household budgets, retailers continue to monitor energy markets, shipping costs and geopolitical developments that could affect prices later this year.
For businesses across the retail sector, the combination of stable consumer inflation and restrained shop prices highlights the continuing challenge of protecting margins while remaining competitive in a cautious consumer market.
