Shop prices continued to ease in January but could begin to grow again in the coming months as retailers grapple with growing Budget-related costs.
According to the BRC-NielsenIQ index, shop prices declined by 0.7% last month, against a 1.0% drop in December as non-food deflation continued.
Non-food product prices fell by 1.8%, fuelled by declines for furniture and fashion in particular, BRC head Helen Dickinson said.
Food inflation eased in the meantime but remained in positive territory, climbing by 1.6%, compared to 1.8% previously, to reflect its lowest rate since November 2021.
Dickinson warned that subsiding prices would likely meet an abrupt end as measures unveiled in October’s Budget fed through to retailers in the coming months, however.
“Price cuts and deflation may not last much longer as retailers will soon feel the full impact of £7 billion of new costs announced at the last Budget,” she said.
“Higher employer national insurance contributions, increased national living wage, and a new packaging levy mean that prices are expected to rise across the board.”
She reiterated calls on the government to avoid hitting retailers with higher business rates, adding: “Without action, UK households will feel the effects.”