UK Shop Price Inflation Eases in February, BRC Survey Shows

Annual shop price inflation in the UK slowed to 1.1% in February, the British Retail Consortium reported, driven by softer food price growth and declines in non-food categories. The BRC noted narrower rises for food overall, a drop in non-perishable food inflation to a four-year low, and a small fall in non-food prices. The trade group warned that new labour market rules could raise retailers' costs, while the Bank of England is closely tracking food prices as inflation expectations remain important. A jump in global energy costs linked to fighting involving the United States, Israel and Iran was flagged as a potential upside risk to inflation if the surge persists.

Key Points

Annual shop price inflation in the UK slowed to 1.1% in February, down from 1.5% in the 12 months to January - impacts retail sector and consumer spending.
Food inflation eased to 3.5% year-on-year; non-perishable food inflation dropped to 2.3%, its lowest in four years - implications for grocery margins and food manufacturers.
Non-food prices fell by 0.1% in February after rising 0.3% in January - relevant for discretionary retail categories and inventory valuation.

British retail prices rose more slowly in February, offering temporary relief for households facing high living costs, according to the British Retail Consortium (BRC).

The BRC said annual shop price inflation eased to 1.1% in February, down from a 1.5% increase over the 12 months to January. The February reading matched the group's three-month average.

BRC commentary

BRC chief executive Helen Dickinson said: "Households got some welcome relief in February as shop price inflation eased. While the direction of travel is promising, prices are still rising, and many consumers remain under pressure."

Breakdown of prices

Overall food inflation was 3.5% year-on-year in February, down from 3.9% in January.
Inflation for non-perishable food items, such as canned goods, fell to 2.3% - the lowest rate in four years - from 3.1% a month earlier.
Non-food prices moved into deflation territory, falling by 0.1% in February after a 0.3% increase in January.

The BRC also cautioned that proposed new labour market laws could raise costs for retailers and put upward pressure on inflation going forward.

Monetary policy context and risks

The Bank of England has been paying close attention to food prices because of their influence on public inflation expectations, the BRC noted. Separately, Britain’s broader consumer price inflation rate had fallen to 3.0% in January, a near one-year low.

However, the report highlighted an external upside risk: global energy prices jumped on Monday amid fighting involving the United States, Israel and Iran. The BRC said that if higher energy prices were sustained, they could feed through into broader inflation.

This survey provides a snapshot of retail pricing trends in February, showing relief in core grocery categories but flagging potential cost pressures from labour market changes and volatile energy markets.

Risks

New labour market laws could raise costs for retailers and push up inflation - potential pressure on retail operating margins and pricing strategies.
A recent surge in global energy prices, linked to fighting involving the United States, Israel and Iran, could add to inflation if the rise is sustained - risk to input and distribution costs across consumer goods and retail.

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Key Points

Risks

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