Retailers Caution that Inflation May Impact UK Shoppers’ Spending as Christmas Approaches.

Data from the British Retail Consortium is accompanied by reports indicating a decline in household disposable income.

Rising costs threaten shoppers’ ability to afford festive treats, with November potentially marking a turning point for inflation. Retailers report slower price reductions, driven by higher fresh produce costs and fewer discounts.

Shop prices fell by 0.6% in November, down from 0.8% in October, according to a report by the British Retail Consortium (BRC) and NielsenIQ. This slowdown was influenced by increased fresh food prices, including seafood, and non-food goods.

Household disposable incomes also declined in October for only the second time this year, dropping by £1.98 due to rising energy costs, Asda’s Income Tracker revealed. The Centre for Economics and Business Research (CEBR) predicts reduced spending power this holiday season, with low-income households feeling the strain of rising essential costs.

Helen Dickinson, CEO of the BRC, warned that November could signal the end of falling inflation, citing challenges like increased employer costs, business rates, and a new packaging levy. These factors, combined with slim retail margins, are likely to drive higher prices in 2025.

Fresh food, particularly seafood, saw notable price increases due to winter import and processing costs. Tea prices remained elevated amid poor harvests, while global coffee prices near record highs could lead to further shop increases despite a recent dip.

Retailers also scaled back discounts ahead of Black Friday, except in struggling sectors like fashion and furniture. However, consumer group Which? cautioned shoppers about misleading Black Friday deals. A review of 227 promotions from 2022 found that many products were the same price or cheaper at other times of the year. In some cases, claimed discounts were based on inflated original prices that had never been applied, such as a hair dryer advertised as reduced from £49.99, though it had not been sold at that price.

Boots responded, stating that the reviewed items were competitively priced or discounted during promotions.