Prices in British shops fell at the fastest pace in more than three years this month but the situation remains volatile with this week’s Budget having the potential to cause an upset.

Inflation has been a major problem for UK consumers and has suppressed some spending. But retailers have to be careful of deflation too as that can eat into margins.

Year on year shop price deflation was 0.8% in the 12 months to October, the BRC said, its weakest since August 2021 and a bigger fall than September’s 0.6% decline. It was the eighth time in nine months that the pace of price growth has weakened.

Non-Food products were a big part of this and remained in deflation at -2.1% in October, unchanged from the preceding month. This is below the 3-month average rate of -1.9%. Inflation is at its lowest rate since March 2021.

But clothing prices edged up for the first time since January as retailers unwound some of their heavy discounting. Many fashion companies in particular have been driving sales via price cuts and that situation doesn’t look like changing for some of them any time soon. Yet this new report shows that there are signs the deflationary spiral is ending for others.

And BRC chief Helen Dickinson called out this trend in the report. She said: “With fashion sales finally turning a corner this autumn, prices edged up slightly for the first time since January as retailers started to unwind the heavy discounting seen over the past year.”

Official figures showed consumer price inflation fell to 1.9% in September, well below a 41-year high of 11.1% it touched in October 2022. The Bank of England is expected to cut borrowing costs in November for only the second time in four years.

Written with Reuters