Clothing and footwear were among items that led the charge in a drop in annual shop price inflation in April, as the heat continues to dial down for UK consumer spending.
Shop price inflation eased to 0.8% in April, down from 1.3% in March, below the three-month average rate of 1.4% according to new figures from the British Retail Consortium. Shop price annual growth is its lowest since December 2021.
Non-food items were in deflationary territory, down 0.6% in April from a rise of 0.2% the previous month. This is below the three-month average rate of 3.9%. Inflation is its lowest since March 2022.
The falls in clothing and footwear are due to retailers ramping up promotions to encourage consumer spend, Helen Dickinson, NRC CEO said.
Meanwhile, food inflation slowed for the twelfth consecutive month to 2.4% from 2.6% a month earlier, as fresh products such as butter, fish and fruits, continued to fall in price due to easing input costs and intense competition between grocers.
Read more: UK economic forecast predicts interest rates to fall to 4.5%
Ambient food inflation also decelerated to 4.9% in April, down from 5.2% in March. This is below the three-month average rate of 5.6% and is the lowest since June 2022.
“While consumers will welcome the lower shop price inflation, geopolitical tensions and the knock-on impact on commodity prices, like oil, pose a threat to future price stability,” said Dickinson.
The new data will be of some consolation to the Bank of England, which has been under pressure due to historically high interest rates. The base rate is currently 5.25% following 14 consecutive interest rate hikes as the central bank tries to get a handle on runaway prices while spurring on the economy.
A read on inflation showed that it had slowed down less than expected, pushing City investors to cut their forecasts for how much the Bank of England will cut interest rates this year. Traders are now pricing in just one interest rate cut this year, compared to expectations of five cuts at the start of 2024.
The UK’s annual inflation rate fell in March for a second consecutive month, dropping to 3.2% — the lowest level since September 2021. Core measure, which strips out volatile elements such as energy, food, alcohol and tobacco, dropped from 4.5% in February to 4.2%.
However, both figures are higher than expected, with the market having looked for CPI of 3.1% in March and core inflation of 4.2%.
Watch: Why interest rates matter to bonds, stocks and cash
Download the Yahoo Finance app, available for Apple and Android.
