Food deflation reported for first time in eight years

Food prices fell in November for the first time since records began in December 2006, according to the latest BRC-Nielsen Shop Price Index (SPI).

Prices dropped by 0.2% in November, with fresh and ambient falling by 0.3% and 0.2% respectively. It is also the first month alcoholic beverages have experienced deflation.

Fresh food displayed the first noticeable drop in October, when prices fell by 0.4%. Pressure came from dairy, vegetable produce, convenience food categories and fish, which outweighed inflation in the oils and fats, meat and fruit categories.

Furthermore, the prices of the majority of the agricultural commodities, followed by Nielsen, fell throughout the year. Coffee, cattle and cocoa prices increased due to weather-related conditions which restricted the supply available. However, they are already seeing an improvement. Cocoa prices have begun to drop as Ivory Coast and Ghana, sourcing 60% of the world’s cocoa, have begun the larger of their two annual harvests.

Wheat prices also followed an upward trend since the September slump when they hit a four year low, though still down 8% this year.

Helen Dickinson, British Retail Consortium director general, said: “We are seeing the big supermarkets investing in price cuts worth millions of pounds during a hugely competitive period in the food market.” Respective of this, she believes a strong trading period lies ahead.

Mike Watkins, head of retailer and business insight, Nielsen, said: “With little inflation pressure we anticipate the good food festive deals to continue and the savvy Christmas shopper can expect some very competitive prices across food retailers.”