Analysis: What does March's Shop Price Index tell us?

Non-food prices have edged into inflationary territories for the first time in 15 months – This has been driven by the slow growth of a number of categories rather than any single category enjoying a boom. BRC director general Helen Dickinson said that improved consumer demand and fewer promotions had driven this.

Food inflation is flat and staying flat – Dickinson predicted food inflation will remain “fairly steady” after two consecutive months of unchanged inflation. A rise in fresh food prices were balanced out by decreases in the prices of tinned and packet goods.

Clothing and footwear prices could rise – Despite a sharp deceleration in its deflation rate to 2.2% in March from 4.2% in February the forecast for fashion prices remains difficult. Cotton prices have been steadily increasing since the start of the year, currently 16% up putting pressure on retailers’ costs. If this persists we may see prices rise when current contracts begin to unwind, the Shop Price Index warned.

George Osborne may have helped furniture and floorcoverings retailers – The category returned to inflationary territory after reporting deflation of 0.1%in February as furniture and carpets rose in price, offset by deflation in household textiles. “The Chancellor provided some welcome news for first-time buyers in last month’s Budget when it introduced its Help-to-Buy scheme. This should provide a stimulus to the sector which relies heavily on the number of house moves,” the index stated.

Deflation is slow in electricals as consumer confidence improved – Deflation was 3.5% in March, up from 4% driven by improvements in appliances, audio and visual products. GfK consumer confidence data released last week showed that consumers’ appetite to make major purchases increased in March.

The poor Easter for gardening retailers came at an inconvenient time – Slowing inflation in the household and garden tools and equipment category last month will have been a blow to retailers who faced poor weather over the key Easter trading period. The Garden Centre Association said yesterday that sales were “well below what was expected”.