Market Analysis

In May, British shop prices saw their slowest increase in 2-1/2 years, according to the British Retail Consortium. The inflation rate for shop prices eased back to normal levels after a recent surge, with annual inflation slowing to 0.6% from 0.8% in April—the smallest rise since November 2021. 

Non-food prices fell by 0.8% year-on-year, following a 0.6% decline in the previous month. Food inflation also continued to decrease for the 13th consecutive month, dropping to 3.2% from 3.4%, marking its lowest level since February 2022.

Mike Watson, head of retailer and business insight at NielsenIQ, noted that after several months of declining input costs, food inflation has stabilized, allowing retailers to pass on price reductions to consumers. Despite easing inflationary pressures and some improvement in shopper confidence, unseasonable weather has dampened retail sales. Consequently, lower prices are expected to persist, prompting increased promotional activity to stimulate demand.

The Bank of England (BoE) is contemplating its first interest rate cut since 2020, focusing particularly on the service sector where prices are running close to 6%, contrasting with the more pronounced cooling of goods prices.

Paraphrasing text from "Reuters" all rights reserved by the original author.