Shop Price Growth Slows in the UK
Shop price growth in the UK has slowed to its lowest rate in over a year, according to data from the British Retail Consortium and NielsenIQ. The year-on-year increase in shop prices stood at just 0.8% in April, marking the slowest growth since December 2021.
This slowdown was particularly evident in food prices, which saw inflation drop to 3.4% in April, the lowest level since March 2022. Analysts attribute this decline to increased promotional activity by retailers in April, likely tied to the Easter sales season. Both food and non-food sectors experienced a moderation in inflation rates, with non-food prices, especially in clothing and footwear, witnessing significant drops due to intensified promotional efforts.
However, geopolitical tensions and potential disruptions to trade flows in the Red Sea could pose a threat to future price stability. Helen Dickinson, chief executive of the British Retail Consortium, highlighted the potential "knock-on impact on commodity prices, like oil, [that] pose a threat to future price stability."
Despite the slowdown in shop price growth, the Bank of England is still expected to raise interest rates twice this year. However, recent signs of stubborn inflation in the United States have led to speculation that the US Federal Reserve may delay rate cuts until 2025. This could impact the Conservative party's election messaging, which has emphasized the strength of the economic recovery under Prime Minister Rishi Sunak.
The upcoming ratesetting meeting on May 9 will provide new economic forecasts, with the current base interest rate standing at a 16-year high of 5.25%. If there are fewer interest rate cuts this year, it could impact the Conservative party's election messaging.
Additionally, fresh food inflation has also shown a slowdown, dropping to 2.4% in the year leading up to April. This further contributes to the narrative of easing price pressures in the market.