UK stores break 5 years of deflation on heat wave

By BLOOMBERG

LONDON • UK shop prices rose for the first time in over five years as the summer heat helped pushed up food costs.

Prices in stores edged up annual 0.1% in August, breaking the 63-month deflation cycle, Nielsen and the British Retail Consortium (BRC) said in a report yesterday.

Prices for non-food items kept declining, but at a slower pace. The sunshine drove Britons to stock up on fans, swimming gear and sunscreen. That allowed retailers to skip the most lavish discounts.

Still, the warm weather didn’t spark a summer fashion boom. Clothing suffered the deepest deflation out of the categories measured, with little sign of recovery.

Food inflation accelerated to 1.9% in August from 1.6% previously as the drought reduced the harvest for some crops.

“With the recent hot summer weather, shoppers have been visiting food stores more often and purchasing more food and drink, with promotional offers helping to limit the impact of some cost increases coming through the supply chain,” said Mike Watkins, head of retail and business insight at Nielsen.

Yet, there’s still only “limited inflationary pressure” coming from retail, he added.

The BRC, an industry lobby group, predicts inflation might soon pick up if Brexit negotiations between the UK and European Union (EU) break down.

“Current inflationary pressures pale in comparison to potential increases in costs retailers will face in the event that we leave the EU without a deal,” said Helen Dickinson, head of the BRC. “If that does happen, retailers will not be able to shield consumers from price increases.”