Fresh Foods Help Keep Price Inflation Down

The British Retail Consortium (BRC) Shop Price Index (SPI) produced in collaboration with Nielsen reported annual inflation of 0.7% in June. It is down from 1.3% in May. The slowdown has continued since March. Food was the main driver with annual inflation of 5.6% from 6.4% in May. Fresh foods and particularly dairy products and some meats were largely responsible. Consumers will be seeing savings on their supermarket bills. Non-foods were up from 1.3% to 1.9%.

The month-on-month basis reported a prices increase of 0.2% in June compared with 0.5% in May. The increase in unemployment is affecting consumer confidence. Discounts and promotions are being offered at the expense of margins. Shopping conditions such as good weather help shoppers take advantage of promotional offers. The BRC maintain that the SPI is a more reliable indicator of shop price inflation than the RPI produced by the ONS.

Modest Rise In National Minimum Wage Welcomed

The small increase of 1.2% in the national minimum wage was welcomed by the trades unions. It was a relief more than anything else as there had been pressure from parts of business to freeze it. The Low Pay Commission announced the NMW will increase by 7 pence to £5.80 per hour from October 2009. The increase for younger people aged 18-21 will be 6 pence to £4.83 and for 16-17 year olds the minimum will rise 4 pence to £3.57. It was also welcomed by the British Retail Consortium and the CBI who said the moderate increase was right to protect jobs in these difficult times. The BRC had suggested to the Low Pay Commission that any increase should not be above 1.5%. They also suggested it might increase job opportunities.

Shop Price Index Down

The British Retail Consortium's Shop Price Index year-on-year index fell from 2.0% in March to 1.4% in April. It is the first time it has fallen since December 2008 when there was a cut in VAT. The month-to-month index fell by 0.5%. Non-food goods are cheaper than a month ago because of discounting. Food is also cheaper this month signalling a possible end to the worst of food price inflation. Retailers’ attempts to keep shopping bills down are being prevented by rising farm gate prices for meat and vegetables.