Overall shop prices in the UK reported deflation of 1.7 per cent in April, marking the three-year anniversary of falling prices.
The decrease, which was the same as the decline seen in March, is the 36th straight month prices have deflated in the UK, which the British Retail Consortium said is down to "intense competition across the industry".
While food prices returned to inflationary territory in April, up 0.1 per cent, the overall decline came from non-food, which was down 2.9 per cent. Fresh food reported annual deflation of 0.5 per cent, while ambient food inflation rose further in April, up 1.0 per cent from the 0.4 per cent rise in March.
Helen Dickinson OBE, chief executive of the BRC, said continued deflation has a serious impact on retailers but as yet they have not made the consumer bear the burden. "It has knock on implications for margins and profitability given the combination of continued investment in digital and rising cost pressures, compounded by recent policy announcements.
"Ensuring they do not pass on these cost increases, alongside the intensity of competition in the market, are the principal reasons why retailers continue to respond to their customers' demands for value."
Mike Watkins, Head of Retailer and Business Insight at Nielsen sees no immediate end to the price war in the UK. "Whilst some food prices have stabilised this month, this is partly due to external factors, and will probably be short term. The underlying trend in shop prices is downwards with continued price cutting by Supermarkets which is driving deflation.
"Further discounts may also be necessary on the high street as the cool spring has impacted the sales of many retailers, and an increase in the levels of promotion over the next few weeks to drive footfall is not out of the question."
© 2016 European Supermarket Magazine – your source for the latest retail news. Article by John Golden. To subscribe to ESM: The European Supermarket Magazine, click here.
