Prices in British shops rose at their slowest pace in nearly three years last month, according to industry figures that highlight the cooling of inflation, though
Prime Minister Rishi Sunak may not see significant political gains in this week's national election.
Annual shop price inflation dropped to 0.2% in June from 0.6% in May, marking the smallest increase since October 2021, the British Retail Consortium (BRC) reported on Tuesday.
Prices for non-food items fell by 1.0% year-on-year after a 0.8% drop in May, driven by promotions on TV sets timed with the Euro 2024 soccer tournament. Meanwhile, food inflation slowed for the 14th consecutive month to 2.5% from 3.2%.
"This will be of help to shoppers as they plan their household budgets for essential goods and services," said Mike Watson, head of retailer and business insight at NielsenIQ, which provides data for the BRC. "With uncertainty around discretionary spending, we expect the intense competition across the marketplace to keep price increases as low as possible this summer."
Despite this positive trend, Sunak's efforts to take credit for the fall in headline inflation—which peaked above 11% in 2022 and returned to the Bank of England's 2% target in May—may not prevent heavy losses to the opposition Labour Party in Thursday's election, according to opinion polls.
The Bank of England is evaluating whether price pressures have diminished enough to warrant cutting interest rates for the first time since 2020. However, with inflation in the services sector near 6%, the timing of any rate cut remains uncertain.
Investors currently estimate a 60% chance that the BoE will cut the Bank Rate to 5.0% from 5.25% on August 1.
BRC Chief Executive Helen Dickinson noted that investments by retailers in improving their operations and supply chains have been limiting price rises. She called on the next government to address cost burdens such as the business rates tax on commercial property and an apprenticeship levy that employers consider inflexible. Photo by Wclifton968, Wikimedia commons.