UK shop prices fall less sharply in June after May slide - BRC

British shop prices fell less sharply in June than in May, but while shoppers could take some comfort from the fact that food price inflation didn't accelerate, non-food prices don't appear to be suggesting any easing of weak conditions, a survey showed on Wednesday.

Overall prices paid by shoppers were 0.5% lower last month than in June 2017, a smaller decline than May’s 1.1% slide, the British Retail Consortium (BRC) said.

Shop prices as measured by the BRC have shown deflation for 62 straight months, reflecting the pressure on retailers to offer discounts to win over shoppers, many of whom have seen sub-inflation pay increases for much of the past decade.

Food inflation held steady at 1.2% in June while non-food prices fell by 1.6%, less steep than May’s 2.5% decline, the BRC said. But while deflation is clearly not as pronounced as it once was, the fashion sector still seems to be suffering and convincing consumers to pay more for goods is proving tough. This is despite retailers having seen their costs rise with higher raw material and manufacturing prices due to the weakness of the pound, higher wage bills and rising business property taxes.

Britain’s headline inflation rose sharply after the 2016 referendum decision to leave the European Union which pushed down the value of the pound. But the impact of the weaker currency has diminished in recent months.

The Bank of England expects inflation, which stood at 2.4 percent in May, to slow further this year from a peak of 3.1% in November. It also expects to raise interest rates gradually to help bring inflation back to its 2% target.

Additional reporting by Sandra Halliday