UK high street prices fell at their fastest pace in nearly two years in early March and are likely to be pulled in different directions soon by the coronavirus crisis, said the British Retail Consortium (BRC) and market research outfit Nielsen on Wednesday.
Shop prices softened by 0.8% in annual terms in the first week of the month. That was the biggest fall seen since May 2018 and followed a 0.6% drop in the same period in February.
PRICE PRESSURES
‘There are a number of price pressures arising from the coronavirus crisis,’ commented Helen Dickinson, chief executive of retail industry trade body the BRC.
‘Food prices, particularly of fresh produce, may be impacted by higher costs on seasonal farm labour, while non-food prices will be pushed down by lower demand,’ she warned.
In a note to clients, Shore Capital pointed out that non-food deflation in March was 1.9% versus a 1.3% 12-month rolling average. ‘In the face of weak and now somewhat non-existent non-essential non-food trade, the deepening of deflation is not surprising whilst there may be some trepidation in some retail quarters as to the potential magnitude of discounting, particularly of some seasonal stock, as and when coronavirus restrictions end,’ cautioned the broker.
FOOD GLORIOUS FOOD
Yet as Shares reported here yesterday, according to Nielsen data, shoppers made almost 80m extra trips to supermarkets in the four weeks to 21 March before the government introduced its ‘lockdown’.
And within the food segment, there is little evidence of the coronavirus crisis driving prices higher yet, noted Shore Capital. In fact UK food prices in March rose by 1.1% versus the 1.6% rate recorded in February, ‘so an easing of upward price pressure, which shows a high level of both discipline and competitive intensity in the UK grocery trade in our view.’
However, the broker has ‘heard concerns raised about the potential to effectively lift the UK seasonal fruit and vegetable crops due to a lack of seasonal workers whilst the global rice market is tightening with export constraints and restrictions evident in Cambodia, India and Vietnam.’
REMARKABLE FIRST QUARTER
Shore Capital, which has identified Bisto-to-Mr. Kipling maker Premier Foods (PFD) as a profit and cash flow beneficiary from the crisis, added: ‘Naturally, we shall be keeping an eye on domestic and international commodity market indicators as smoke signals for pending price movement.
‘There have been a lot of moving parts in the remarkable first quarter of 2020 with sterling circa 6% lower against the dollar, crude oil falling by two-thirds in value and the collapse of non-food discretionary demand offset by the spike in retail food purchases mirrored by the tail down in food and beverage.’
