UK shop price inflation eased to 1.0% in April from 1.2% in March as Easter discounts helped retailers stimulate spending, though the BRC warned Middle East cost pressures are fast approaching.
Summary
- The British Retail Consortium said UK shop prices rose 1.0% year on year in April, down from 1.2% in March, as Easter promotions on chocolate, home renovation materials and clothing eased the monthly reading
- Food price inflation slowed to 3.1% from 3.4%, with retailers competing harder on price amid weakening consumer confidence
- Separate CBI data published Monday showed retailers reported the biggest fall in sales volumes in more than 40 years
- The BRC’s measure covers a narrower basket than official UK CPI, which stood at 3.3% in March; the IMF forecasts British inflation will reach 4% this year
- BRC chief executive Helen Dickinson warned the full force of the Middle East conflict has yet to feed into consumer prices but said it would not be long before it does
- NIQ analyst Mike Watkins cautioned that accelerating inflation is likely to weigh further on already fragile consumer spending
- Note: the Bank of England’s Monetary Policy Committee is meeting this week to set interest rates. Most economists expect rates to be held for now, with the MPC monitoring the extent to which businesses are passing on higher costs. Governor Andrew Bailey said this month that businesses he had spoken to reported a lack of pricing power, offering some reassurance that inflation would not surge as it did in 2022 when it topped 11%
UK shop price inflation eased slightly in April as Easter promotions across chocolate, home renovation products and clothing gave retailers a tool to stimulate spring spending, according to the British Retail Consortium’s monthly survey of major chains. The respite, however, is widely expected to be short-lived.
The BRC said prices in April were on average 1.0% higher than a year earlier, down from a 1.2% annual increase in March. Food price inflation also softened, slipping to 3.1% from 3.4%. BRC chief executive Helen Dickinson attributed the improvement in part to competitive pricing by retailers facing a consumer base whose confidence has deteriorated markedly in recent months.
The underlying picture is considerably less encouraging. Separate figures published by the Confederation of British Industry on Monday showed that retailers this month reported the steepest fall in sales volumes in more than 40 years, a reading that points to a consumer under serious strain well before the inflationary consequences of the Iran war have fully arrived.
The BRC measure covers a narrower basket of goods than Britain’s official consumer price index, which registered 3.3% in March. The International Monetary Fund has forecast that UK inflation will reach 4% this year, a projection that assumes ongoing transmission of higher energy and import costs driven by the disruption to Middle East supply routes. Dickinson made the point plainly, saying the full force of the conflict had yet to hit consumer prices but would do so before long.
Retailers have so far absorbed much of the cost pressure rather than pass it directly to customers, a strategy driven by the need to protect already fragile demand. NIQ analyst Mike Watkins, whose firm provides data for the BRC survey, warned that accelerating inflation and weak consumer confidence are a damaging combination, and that retailers can only hold the line for so long before price increases become unavoidable.
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The data lands at a sensitive moment for UK monetary policy. The Bank of England’s Monetary Policy Committee is meeting this week to set interest rates, with most economists expecting rates to be held for now as policymakers weigh the competing pressures of slowing demand and building inflation. Governor Andrew Bailey said this month that businesses he had spoken to reported a lack of pricing power, offering some reassurance that inflation would not accelerate as sharply as it did in 2022, when it peaked above 11%. The MPC will nonetheless be watching closely for any sign that firms are beginning to pass on higher costs, a development that could force its hand regardless of the weakness in underlying demand.
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The April BRC data offers a modest positive for UK consumer sentiment but should not be read as a trend. The Easter effect is mechanical and temporary, driven by promotional activity rather than any structural easing of cost pressures. The more telling data point sits alongside it: the CBI’s survey showing the biggest fall in retail sales volumes in more than 40 years signals that demand is deteriorating sharply even before the full inflationary impact of the Iran war feeds through. Sterling-denominated import costs and energy prices remain elevated, and the IMF has already pencilled in UK inflation reaching 4% this year.
UK shop price inflation eased to 1.0% in April from 1.2% in March as Easter discounts helped retailers stimulate spending, though the BRC warned Middle East cost pressures are fast approaching
