Market News

(Bloomberg) -- Clothing, footwear and other non-food products in UK stores slid into deflation for the first time in more than two years as the Bank of England considers cutting interest rates.

Non-food prices fell 0.6% in the first week of April, the British Retail Consortium said Tuesday. The category was last deflationary from June 2019 to December 2021, before prices rose due to post-Covid spending, supply shortages and then Russia’s invasion of Ukraine.

“Shop price inflation levels are showing signs of normalizing, providing relief to households,” said Helen Dickinson, the BRC’s chief executive officer.

Prominent UK retailers said in recent weeks that price pressures have eased substantially. Simon Wolfson, boss of Next Plc, said “we are now entering a new era” as the high street fashion outlet published a bullish update last month.

The owner of discount chain Primark also raised its outlook last week. As salaries rise higher than inflation, sales volumes could increase further, George Weston, CEO of Associated British Foods, said.

Overall, the BRC’s data showed shop prices rising 0.8%, dragged up by food inflation of 3.4%. However, those numbers are still down on the previous month when they came in at 1.3% and 3.7% respectively.

The data bolsters expectations that the BOE will lower its key lending rate from a 16-year high of 5.25%, although markets are pricing in just two reductions this year. Policymakers on Threadneedle Street will convene next Thursday to set rates.

A separate survey, published Tuesday by the CBI business group, showed an easing of inflationary pressures in the services sector, particularly in business and professional services.