What’s going on here?

UK shop prices fell year-on-year for the first time since October 2021, due to the summer Sales for clothing and household goods, according to a recent survey.

What does this mean?

The British Retail Consortium (BRC) recorded a 0.3% fall in shop prices in August 2024 compared to the same period last year, reversing a 0.2% rise in July. Non-food products saw a significant 1.5% fall – the sharpest in over three years. Food prices, meanwhile, rose 2.0%, slowing from July’s 2.3% rise and the smallest increase since November 2021. According to an expert at NielsenIQ, many non-food retailers continued their special offers due to the unpredictable weather, while food retailers cut prices to boost sales during major events such as the Paris Olympics and the 2024 European Championships.

Why should I care?

For markets: Navigating the changing times.

The latest official annual consumer Price inflation (CPI), which includes services and purchasing goods, rose to 2.2% in July from 2.0%, the first increase this year. The Bank of England (BoE) expects CPI inflation to peak at around 2.75% by year-end as the impact of energy price cuts fades in 2023. CPI inflation is expected to return to the BoE’s 2% target by early 2026.

The overall picture: An economic realignment is underway.

The Bank of England is expected to interest Interest rates have been cut from their 16-year high, with investors expecting at least another quarter-percentage point cut by the end of the year. The move is aimed at managing inflation expectations and stabilising economic growth as the UK grapples with post-Brexit realities and global economic changes.