LONDON (Reuters) – UK retailers reported the smallest price drops since the start of the COVID pandemic, in part due to shoppers buying more clothes and shoes as closures eased , and they said price pressures are likely to increase further through the remainder of 2021.
With the Bank of England watching closely for signs of a rapid recovery in inflation, the British Retail Consortium’s store price index for May showed prices were 0.6% lower than the previous year, against a drop of 1.3% in April.
This is the smallest drop since February 2020.
The BRC store price index typically shows year-over-year price declines, unlike the broader measure of consumer price inflation targeted by the BoE which includes a wider range. of goods and services.
The BoE has forecast that the CPI is expected to exceed its 2% target and exceed 2.5% by the end of 2021, due to a global rise in energy prices and what the central bank sees as temporary pressures and one-off effects linked to the pandemic.
UK shoppers were more inclined to spend on new clothes and shoes last month as social distancing restrictions eased, allowing people to meet in pubs and restaurants, the BRC said.
COVID-related supply chain disruptions have also pushed up the cost of furniture and electrical products, he added.
Prices are expected to rise more widely later in the year, said BRC chief executive Helen Dickinson.
“Global food prices are currently at their highest level in seven years, shipping costs have tripled since 2019 and commodity prices are climbing. We’ll probably see those costs filter out in the second half of this year, ”she said.
Some new post-Brexit rules that affect food imports from the European Union come into effect on October 1, with others coming later, which the BRC says would also push prices up.
The BRC collected the price data between May 3 and May 7.
Reporting by David Milliken; Edited by William Schomberg