In February 2025, shop price deflation in the UK remained steady at 0.7% year-on-year, mirroring January's figures and slightly above the three-month average deflation rate of 0.8%.
Despite this overall stability, the month witnessed the most significant monthly price increase in a year, particularly impacting essential food items.
Food prices on the rise
Food inflation experienced an uptick, reaching 2.1% year-on-year in February, up from 1.6% in January and surpassing the three-month average of 1.8%.
Fresh food prices saw a year-on-year rise of 1.5% in February, an increase from January’s 0.9%, while ambient food products witnessed a more significant inflation rate of 2.8%, escalating from the 2.5% rise seen in January.
Breakfast staples such as butter, cheese, eggs, bread, and cereals experienced notable price hikes. Additionally, climbing global coffee prices could further elevate morning costs in the coming months.
Non-food items and retail strategies
In the non-food sector, deflation decelerated slightly to 2.1% year-on-year in February, compared to a 1.8% decrease in January, aligning with the three-month average. This shift is partly attributed to the conclusion of January sales promotions, especially in categories like electricals and furniture.
Despite these changes, discounting remains widespread in the fashion industry as retailers strive to attract customers amidst weak demand.
To manage rising costs, consumers are increasingly turning to supermarket loyalty schemes and special offers. Retailers are responding by enhancing these programmes to retain customer loyalty and maintain sales volumes.
Future outlook and contributing factors
Looking ahead, several factors are expected to exert upward pressure on prices. Geopolitical tensions, a £7bn increase in costs from the Autumn Budget, and the introduction of a new packaging levy are anticipated to impact retailers.
The British Retail Consortium forecasts that food prices could rise by over 4% in the second half of the year.
To mitigate these pressures, industry leaders are urging the government to take action, such as ensuring that new business rates proposals do not result in higher costs for retailers and delaying the implementation of new packaging taxes.
In summary, while overall shop price deflation remained unchanged in February 2025, notable increases in food prices, especially for everyday breakfast items, signal potential challenges ahead for both consumers and retailers.
