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Summary
- May’s shop price fall was lower than the previous month’s decrease of 1.3 per cent, said the latest BRC report.
- The deflationary trend continued in May as the high street retailers kept offering lower prices and supermarkets promoted food and drinks.
- However, as the shipping and energy costs rise, commodity prices are likely to climb up in the months to come.
The latest BRC (British Retail Consortium) -NielsenIQ shop price index suggests that the UK shop prices continued their easing trend and fell by 0.6 per cent in May. However, it was a slower decline than April’s decrease of 1.3 per cent, when consumers had enjoyed higher benefits of falling shop prices. But experts suggest that this deflationary trend is temporary, and the British consumers are expected to be hit by rising food and shipping costs later this year.
The BRC- NielsenIQ shop price index measures a year-on-year variation in the retail shop price in the UK. The price data for the latest index values were collected between 3 and 7 May.
In fact, May’s price drop was smaller than the earlier months as the demand started to pick up with the easing of social distancing restrictions. But the momentum of deflationary trend continued in May as the high street retailers kept offering lower prices and supermarkets promoted food and drinks to drive their sales.
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Also Read: Focus On 2 Lesser-Known Retail Stocks as Retail Sales Jump in April
Break-up of price variation
While the food, clothing and footwear prices reduced in May, that of furniture and electricals rose for the month due to supply chain disruptions.
Additionally, the prices of non-food items decelerated by 0.8 per cent for May, against a higher fall of 1.7 per cent in April. Food prices shrank by 0.3 per cent in May compared to a deflation of 0.6 per cent the previous month.
Also Read: Focus on 2 FTSE 250 Retail stocks: Dunelm PLC and Frasers Group PLC
Higher prices in pipeline
As the shipping costs rise, commodity prices are likely to climb up in the months to come, said Helen Dickinson, chief executive, BRC. She added that the UK government could help lower the inflation burden on consumers by minimising the effect of documentation and new checks needed from this October.
Apart from this, the household bills will also be rising in the near-term due to higher energy and fuel costs, said Mike Watkins, head - retailer and business insight, NielsenIQ. In fact, the yearly inflation rate for motor fuels alone was a whopping 13.6 per cent in April as the crude oil prices soared with a rise in demand.
The Bank of England is also closely watching the signs for a broad-based rise in inflation and mulling over the need to step in. However, the central bank bases its decisions on the official measure of price-rise, namely the consumer price inflation (CPI) that includes a wide range of goods and services rather than a more focused and narrow-based measure like a shop price index.
Also Read: Interest Rates Could Rise Next Year, Says Bank of England’s Vlieghe
Let us now take a look at the recent stock performance of two retail firms – Shoe Zone Plc and JD Sports.
Shoe Zone Plc (LON:SHOE)
Shoe Zone Plc is a shoe retailer with over 500 stores selling low price shoes across the UK and Ireland. The company’s shares were up 3.92 per cent to 79.50 pence in early morning trade on Wednesday.
JD Sports Fashion Plc (LON: JD.)
JD Sports is a Greater Manchester based sports-fashion retail firm with retail shops spread all across the world. The company’s shares (LON: JD.) were trading at 954.40 pence in the morning hours on 2 June, up 0.59 per cent from their previous close.
