UK retailers report more inflation pressure as economy reopens

·2-min read
A shopper pushes a trolley in a supermarket in London

By David Milliken

LONDON (Reuters) - British retailers have reported the smallest price falls since the start of the COVID pandemic, partly due to shoppers buying more clothes and shoes as lockdowns eased, and they said price pressures were likely to rise further over the rest of 2021.

With the Bank of England watching carefully for signs of how quickly inflation is picking up, the British Retail Consortium's shop price index for May showed prices were 0.6% lower than a year before, compared with a 1.3% fall in the year to April.

This was the smallest drop since February 2020.

The BRC's shop price index typically shows year-on-year price falls, 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 CPI is likely to overshoot its 2% target and go above 2.5% by late 2021, due to a global rise in energy prices and what the central bank views as temporary pressures and one-off effects linked to the pandemic.

British shoppers were keener to spend on new clothes and shoes last month as social-distancing restrictions eased, enabling people to meet at pubs and restaurants, the BRC said.

Supply chain disruption linked to COVID had also pushed up the cost of furniture and electrical goods, it added.

Prices were likely to rise more broadly later in the year, BRC chief executive Helen Dickinson said.

"Global food prices are currently at their highest in seven years, shipping costs have risen threefold since 2019, and commodity prices are climbing. We will likely see these costs filter through in the second half of this year," she said.

Some new post-Brexit rules which affect food imports from the European Union take effect from Oct. 1, with others coming later, which the BRC warned would push up prices too.

The BRC collected price data between May 3 and May 7.

(Reporting by David Milliken; Editing by William Schomberg)

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