British shop prices rose at their slowest rate in almost three years in June, signaling a cooling in inflation, though the impact on the national election may be limited.
UK, Bollywood Fever: Prices in British shops rose at the slowest pace in almost three years last month, according to industry figures, indicating a cooling in inflation. However, Prime Minister Rishi Sunak is unlikely to see much benefit from this in this week’s national election.
The British Retail Consortium (BRC) reported on Tuesday that annual shop price inflation slowed to 0.2% in June from 0.6% in May, marking the smallest increase since October 2021. Prices for non-food goods fell by 1.0% annually after a 0.8% drop in May, aided by promotions on TV sets timed to coincide with the Euro 2024 soccer tournament. Food inflation also slowed for the 14th consecutive month, decreasing to 2.5% from 3.2%.
“This will be of help to shoppers as they plan their household budgets for essential goods and services,” said Mike Watson, head of retailer and business insight at NielsenIQ, which provides data for the BRC. “With uncertainty around discretionary spending, we expect the intense competition across the marketplace to keep price increases as low as possible this summer.”
Sunak has sought to claim credit for the decline in headline inflation, which peaked at over 11% in 2022 and returned in May to the Bank of England’s 2% target. Despite this, opinion polls suggest his Conservative Party will face significant losses to the opposition Labour Party in Thursday’s election.
The Bank of England (BoE) is currently assessing whether price pressures have eased sufficiently to warrant a cut in interest rates for the first time since 2020. However, with inflation in the services sector running at nearly 6%, the timing of any rate cut remains uncertain. Investors are placing a roughly 60% chance on the BoE reducing the Bank Rate to 5.0% from 5.25% on August 1.
BRC Chief Executive Helen Dickinson noted that investment by retailers to improve their operations and supply chains was helping to limit price rises. She urged the next government to address cost burdens such as the business rates tax on commercial property and an apprenticeship levy that employers criticize as inflexible.
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