The cost of shopping has fallen to its lowest rate since May 2022, thanks to big discounts offered by retailers.
The British Retail Consortium (BRC)-NielsenIQ Shop Price Index shows that shop prices in January were only 2.9 percent higher than a year ago, down from 4.3 percent in December.
Non-food items saw the biggest drop in inflation, falling to 1.3 percent in January from 3.1 percent in December – the lowest rate since February 2022.
Food prices also fell, with food inflation slowing to five percent in February, from 6.1 percent in January. This is the ninth month in a row that food inflation has fallen and is the lowest rate since June 2022.
The BRC said this was good news for tea and milk drinkers as prices fell, but warned that alcohol remained more expensive due to increased duties.
Fresh food inflation also slowed to 4.9 percent, down from 5.4 percent a month earlier.
Helen Dickinson, BRC chief executive, said: “Some new year cheer as January shop price inflation slid to its lowest level since May 2022.”
She added that non-food goods drove the fall, as many retailers offered heavily discounted goods in their January sales to entice consumer spending amidst weak demand. However, she warned that higher geopolitical tensions could add to uncertainty and costs in supply chains.
Other experts noted that, while the news may appear positive, the impact won’t be felt immediately.
Simon Geale, executive vice president of procurement at Proxima told Express.co.uk: “Whilst today’s news that food inflation has slowed is positive for consumers, there won’t be any immediate relief on their pockets. It’s important to remember that the slow in the rate of increase is not a price cut and must be looked at relative to wages.”
He noted that this is “especially critical” at a time when consumers are feeling the pinch from elsewhere. Over one million fixed rate mortgages under 2.5 percent will renew this year, leaving a huge number of households likely facing a sharp increase in costs.
Mr Geale added: “The introduction of new Brexit bureaucracy on the border is also set to drive up food costs for consumers, with complex paperwork to certify all EU animal and plant products carrying an estimated £330million annual price tag.
“These figures are positive for consumers and businesses alike in the long term, but they are just one piece of a complex landscape that must be navigated before benefits are felt.”
Rajan Lakhani, personal finance expert at smart money app Plum, also said that, while this is a “move in the right direction”, it doesn’t mean much “immediate relief” for people’s everyday finances.
Mr Lakhani said: “The truth remains that food items cost much more than they did 18 months ago and it’s very doubtful whether essentials will fall back in price to 2021 levels any time soon. We’d also need to see a similar decrease in services inflation if the impact on people’s wallets is to be substantially mitigated.”
However, he noted: “It has been a challenging environment for retailers with wages continuing to grow ahead of the new Living Wage in April and external complexities affecting import prices. But with energy bills starting to decrease, UK produce in particular may start to get cheaper again, which will be good news for the weekly grocery shop.”
Mike Watkins, head of retailer and business insight at NielsenIQ, said: “Shoppers are seeing savings at the checkout, with non-food retailers on promotion and food retailers continuing to reduce prices when the costs of goods fall.”
“However, consumer demand remains fragile as most households are yet to feel better off after nearly two years of inflation.”
It comes just days after the ONS said food prices fell on a monthly basis for the first time since September 2021, and the largest downward push on inflation came from furniture and household goods.
ONS chief economist Grant Fitzner said on February 14: “Inflation was unchanged in January, reflecting counteracting effects within the basket of goods and services.
“The price of gas and electricity rose at a higher rate than this time last year due to the increase in the energy price cap, while the cost of second-hand cars went up for the first time since May.
“Offsetting these, prices of furniture and household goods decreased by more than a year ago and food prices fell on the month for the first time in over two years. All of these factors combined resulted in no change to the headline rate this month.”
The annual rate of food and non-alcoholic beverages dropped from eight percent in December 2023 to seven percent in January 2024, which is the lowest annual rate since April 2022.
According to ONS, the fall to seven percent means the annual rate has eased for the tenth consecutive month. This follows a peak of 19.2 percent in March 2023, the highest annual rate in over 45 years.
