Shop price inflation slowed more than expected in February, offering households tentative relief from cost-of-living pressures as retailers stepped up discounting and global food prices eased.

New data from the British Retail Consortium (BRC) and NielsenIQ showed shop prices rose 1.1 per cent year-on-year in February, down from 1.5 per cent in January. The deceleration reflects intensified competition across both food and non-food sectors, with retailers cutting prices to stimulate demand amid weak consumer confidence.

The figures come ahead of the spring statement, when the Office for Budget Responsibility is due to update its outlook on growth and public finances. They add to recent signs that inflationary pressures are moderating, after official data showed UK consumer price inflation fell sharply to 3 per cent in January, moving closer to the Bank of England’s 2 per cent target.

Food prices remain elevated but are increasing at a slower pace. Annual food inflation eased to 3.5 per cent in February from 3.9 per cent the previous month. Fresh food inflation edged lower, while ambient food inflation, covering products such as coffee, pasta, canned goods and other cupboard staples, fell to 2.3 per cent, its lowest level in four years.

The BRC said lower global commodity costs were filtering through supply chains, helping to stabilise grocery prices. However, it emphasised that competitive dynamics were playing a crucial role, particularly in discretionary categories such as fashion, health and beauty.

Prices for non-food items, including clothing, electronics and household goods, declined by 0.1 per cent year-on-year, compared with 0.3 per cent growth in January. Heavy promotional activity in fashion and personal care, coupled with softer demand due to unseasonal 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 pressures had not disappeared. She noted that while the pace of price rises is moderating, many households continue to feel strain from higher cumulative costs over the past three years.

Mike Watkins, head of retailer and business insight at NielsenIQ, said pricing behaviour had shifted notably since the start of the year. “Competitive pricing across both food and non-food is helping to bring down inflation,” he said, though he cautioned that demand remains unpredictable as shoppers continue to prioritise essentials and trade down to value options.

The easing in shop price inflation follows a mixed economic backdrop. The government recently reported a record £30.4 billion budget surplus in January, driven by strong tax receipts and lower debt interest payments. Retail sales also surprised on the upside. However, unemployment has climbed to a five-year high and economic growth remains sluggish, tempering optimism.

Retailers have also flagged potential future cost pressures. The upcoming implementation of the Employment Rights Act and higher employment costs could increase operating expenses later this year. Industry leaders warn that if secondary legislation raises labour or compliance costs significantly, businesses may be forced to pass some of those increases on to consumers.

For now, the slowdown in shop price inflation suggests that competitive retail markets and easing global input costs are helping to cushion households. Whether that trend continues will depend on energy prices, wage dynamics and the broader economic outlook in the months ahead.

Jamie Young

Jamie is Senior Reporter at Business Matters, bringing over a decade of experience in UK SME business reporting.
Jamie holds a degree in Business Administration and regularly participates in industry conferences and workshops.

When not reporting on the latest business developments, Jamie is passionate about mentoring up-and-coming journalists and entrepreneurs to inspire the next generation of business leaders.