Retail industry reacts to March inflation dip

Core Inflation came in at 4.2% in the 12 months to March 2024, down from 4.5% in February while food inflation fell one percentage point to 4.0%.

Price falls for food items, including meat prices which fell by 0.5% between February and March, compared with a rise of 1.4% a year ago, helped drive inflation down to its lowest level in two-and-a-half years.

Pork products are said to be one of the big reasons behind the slowing rate.

According to the Office for National Statistics (ONS), the price rises seen across most types of food products eased between February and March, with small increases being seen for bread and cereals.

Kris Hamer, director of insight of the British Retail Consortium (BRC), commented: “Cost pressures on households eased in March as inflation dropped to its lowest level since September 2021.

“Energy prices remain deflationary, while falling inflation rates for clothing and household furniture and equipment were also key in driving down the headline figure.

“Consumers benefitted as food inflation fell once again, marking twelve months of consecutive drops. This was helped by falls in the cost of a roast dinner as the price of beef, pork and potatoes all fell.

“As some cost pressures in the supply chain begin to ease, retailers have worked hard to pass on savings where they can and offering their customers the best value for money.

“In a year of elections, politicians, both locally and nationally, must recognise retail’s role in the economy, providing jobs and investment in every corner of the country and helping deliver government policy through its scale and reach.

“Competition between retailers has played a key role in bringing down inflation for the public and it is vital that politicians consider the inflationary impact of new policies which might reverse this progress and result in higher prices for consumers in the long run.”

Josh Graham, co-founder and chief marketing officer at Airtime Rewards, said: “The retail landscape is finally looking up, as inflation continues to decline. With the promise of warmer, extended evenings on the horizon, consumers are gearing up to embrace leisure and retail experiences well into the night. Notably, confidence in personal finance saw a significant uptick in March, marking the highest level since December 2021.

“Combine this with two May bank holidays just around the corner, retailers have a prime opportunity to unlock greater footfall and capitalise on increased consumer willingness to spend. Nevertheless, brands must maintain a proactive approach, exploring innovative ways to deliver exceptional experiences that draw consumers both online and into physical retail spaces.”

Boudewijn Driedonks, partner at McKinsey & Company, said: “There is hope the UK is slowly but steadily approaching sustainable levels, even if core inflation remains high. After the surprise rise in US inflation, a second consecutive fall in the UK headline rate will be a relief.

“Falls in closely watched food price inflation will be particularly welcomed at a time when price increases in services prove to be sticky. Households may even start to feel that the food inflationary squeeze is easing up, as prices on the shelves increase at the lowest rate in months

“While inflation appears to be heading in the right direction, and the latest activity indices signals the end of contraction of the UK economy, market conditions remain fragile.

“While the services industry is growing, manufacturing is not, and consumers continue to pay high prices. Companies will want to navigate this year carefully, doubling down on pockets of growth, and benefitting from easing input prices where possible. For the consumer, finally, there is some reason to be more optimistic about what’s ahead.”