Store price increases slowed more than expected in February, giving households temporary relief from cost-of-living pressures as retailers increased discounts and food prices fell worldwide.
New data from the British Retail Consortium (BRC) and NielsenIQ showed that store prices rose 1.1 percent year-on-year in February, compared to 1.5 percent in January. The slowdown reflects increased competition in both the food and non-food sectors, with retailers cutting prices to boost demand amid weak consumer confidence.
The figures come ahead of the spring statement in which the Office for Budget Responsibility will update its outlook for growth and public finances. They add to recent signs that inflation pressures are easing after official data showed that UK consumer price inflation fell sharply to 3 percent in January, moving closer to the Bank of England’s 2 percent target.
Food prices remain high but are rising more slowly. Annual food inflation fell to 3.5 percent in February from 3.9 percent in the previous month. Fresh food inflation fell slightly, while ambient food inflation, which includes products such as coffee, pasta, canned goods and other staples, fell to 2.3 percent, the lowest in four years.
The BRC said lower global raw material costs would be reflected in supply chains and help stabilize food prices. However, it was emphasized that competitive dynamics play a crucial role, particularly in discretionary categories such as fashion, health and beauty.
Prices of non-food items, including clothing, electronics and household goods, fell 0.1 percent year-on-year, compared with growth of 0.3 percent in January. Strong promotional activity in fashion and personal care, as well as weaker demand due to unusual weather and fragile sentiment, contributed to the decline.
Helen Dickinson, chief executive of the BRC, described the slowdown as a “welcome relief” but warned that the pressure had not gone away. She noted that while the pace of price increases was slowing, many households remained burdened by higher cumulative costs over the past three years.
Mike Watkins, head of retail and business insight at NielsenIQ, said pricing behavior has changed significantly since the start of the year. “Competitive prices in both food and non-food items are helping to reduce inflation,” he said, but warned that demand remains unpredictable as shoppers continue to prioritize essentials and resort to low-cost options.
The decline in retail price inflation follows a mixed economic backdrop. The government recently reported a record budget surplus of £30.4 billion in January, driven by high tax revenues and lower debt interest payments. Retail sales also surprised positively. However, unemployment has risen to its highest level in five years and economic growth remains sluggish, dampening optimism.
Retailers have also flagged possible future cost pressures. The impending implementation of the Employment Rights Act and higher employment costs could increase operating costs later this year. Industry leaders warn that companies could be forced to pass on some of these increases to consumers if secondary legislation significantly increases labor or compliance costs.
For now, the slowdown in retail price inflation suggests that competitive retail markets and falling global input costs are helping to cushion households. Whether this trend continues will depend on energy prices, wage dynamics and the general economic outlook in the coming months.
