The British Retail Consortium and NielsenIQ have released data indicating that the shop price growth rate in the UK slowed to just 0.8% in the year leading up to April, the lowest increase since December 2021. Notably, the decline was especially notable in food prices, which saw inflation decrease to 3.4% this month, marking the lowest level recorded since March 2022.
Helen Dickinson, the chief executive of the British Retail Consortium, noted that both food and non-food sectors witnessed a moderation in inflation rates. This trend was particularly evident in non-food prices, especially in clothing and footwear, which experienced significant drops due to heightened promotional efforts by retailers during the Easter sales season. Analysts suggest that this decline in shop prices can be attributed to the increased promotional activity undertaken by retailers in April.
In light of geopolitical tensions such as the conflict between Israel and Hamas and disruptions to trade flows in the Red Sea, there are concerns about potential impacts on commodity prices like oil, posing threats to future price stability. The potential knock-on effects to commodity prices may necessitate adjustments in various sectors. Analysts from Goldman Sachs have calculated that suppliers might increase oil output to replenish global oil inventories, which could exert downward pressure on prices.
As the trajectory of inflation continues to be scrutinized, discussions have arisen regarding potential interest rate cuts by the Bank of England. Initial expectations were for significant monetary loosening; however, recent signs of persisting inflation in the United States have prompted a reevaluation of these forecasts. While the Bank of England is expected to lower UK interest rates twice this year, there is speculation that the US Federal Reserve might delay rate cuts until 2025. Notably, officials like Huw Pill and Andrew Bailey have indicated a willingness to consider rate cuts, signaling a potential shift in monetary policy approaches.