The latest figures from the British Retail Consortium (BRC) and NielsenIQ show a welcome decline in UK shop price inflation, offering some relief to consumers squeezed by rising costs.

Shop price inflation fell to 1.3% in March this year, down from 2.5% a month earlier. This marks the lowest annual increase since December 2021 and falls below the three-month average of 2.2%.

The slowdown is driven by a combination of factors, including:

Falling food prices: Food price inflation decelerated for the tenth consecutive month, reaching 3.7% in March 2023 compared to 5.0% in February 2023.

This decline reflects both easing global commodity prices and fierce competition among supermarkets offering targeted promotions for Mother’s Day and Easter.

Non-food price slowdown: Inflation on non-food items also witnessed a significant drop, falling to 0.2% in March from 1.3% the previous month.

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Retailers ramped up promotions on electricals, clothing, and footwear to attract customers.

BRC CEO Helen Dickinson cautions against expecting pre-pandemic prices, speaking to the British Broadcasting Corporation‘s Today programme. While the downward trend is positive, Dickinson warns consumers not to anticipate a complete return to pre-pandemic price levels.

“We won’t see significant falls in prices back to pre-Covid levels, to do that would require deflation that we haven’t seen since the (1930s) Great Depression,” she said.

The BRC warns that despite the encouraging inflation data, retailers still face significant cost pressures that could threaten the downward trend.

These pressures include a 6.7% rise in business rates, new recycling proposals, and post-Brexit border checks, all coinciding with the record hike in the National Living Wage.

“The industry needs pro-growth government policy that supports investment and helps keep down prices for households up and down the country,” said Dickinson in a statement.

Overall, the retail sector presents a mixed picture. While a significant decline in shop price inflation offers some relief to consumers, rising costs threaten to reverse this trend.

The coming months will be crucial in observing how retailers navigate these challenges and whether the positive inflation trajectory can be sustained.