Retail promotions and price cuts helped limit the impact of rising inflation in August, according to a new monthly report. While the overall level of inflation increased, retailers managed to keep a lid on food prices through aggressive summer campaigns.
Farmers markets and discount stores saw steady foot traffic as shoppers hunted for bargains. Food inflation accelerated to 2.8% in August, up from 2.2% in July, according to the BRC-NIQ sales monitor. The uptick was driven by a significant jump in ambient food prices, which rose to 2.5% year on year.
This figure more than doubled compared to the 1.1% increase recorded in July. However, fresh food prices actually declined by 0.1% to 3%. This dip occurred as retailers focused their discounting efforts on summer produce lines. The divergence between ambient and fresh sectors highlights how targeted campaigns can alter consumer price trends.
“While the increase in both food and non-food inflation is not unexpected, particularly as some of the summer promotional activity seen in recent months comes to an end, retailers continue to keep prices low, helping consumers manage rising household costs such as energy and fuel,” said Mike Watkins, NIQ head of retailer business and insight.
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He added that pressures are building across supply chains and that price competition will likely intensify in the coming months.
Supply chain issues push up non-food costs
Shop price inflation overall climbed to 1.5% in August, up from 0.9% in July. This increase reflects the growing cost of energy and imports as the US Iran war begins to filter through to consumer prices.
Non-food prices faced upward pressure from higher energy costs and commodity prices. Specifically, electrical prices rose amid the ongoing AI boom, which is forcing up the price of memory chips and storage.
“Shop price inflation rose to its highest level in over two years, albeit well below the headline Consumer Price Index,” said BRC chief executive Helen Dickinson.
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She noted that the impact of higher energy, input, and commodity costs is beginning to filter through into prices. Dickinson also observed that retailers kept clothing prices low to offer value for families preparing for the new school year.
Households face challenging months ahead as energy bills rise. At the same time, retailers will find it harder to absorb rising operating costs without impacting investment, jobs, and prices.
If the government is serious about supporting growth while keeping the cost of living in check, it must address the cost of doing business, including by tackling the growing burden of business rates, packaging, and employment taxes, she added.