What: UK shop prices fall for the second consecutive month, reaching the lowest rate in over three years, signalling potential easing of the cost of living crisis.

Why it is important: This trend suggests a turning point in the UK's economic landscape, potentially easing pressure on consumers and reshaping retail strategies in response to changing market conditions.

UK shop prices have decreased for the second consecutive month, with a 0.6% annual fall in September, marking the lowest rate since August 2021. This data, provided by the British Retail Consortium, indicates a potential easing of the cost-of-living crisis that has affected millions of households.

The decline is primarily driven by non-food items, which saw a 2.1% annual price drop, the most significant since March 2021. However, food inflation slightly increased to 2.3% in September from 2% in August, due to higher prices for cooking oils and sugary products linked to poor harvests in key producing regions.

This trend reflects a broader shift in the retail landscape. Major retailers like Ikea have slashed prices on thousands of products in response to easing cost pressures. During the Black Friday period, UK retailers increased discounts to attract customers who were cutting spending. Similarly, M&S extended its price lock on essential food items until Easter to address ongoing cost-of-living concerns.

While challenges remain, including potential geopolitical tensions and climate change impacts, this price deflation suggests a potential turning point in the UK's economic recovery.

IADS Notes: The UK retail landscape is showing signs of adaptation to changing economic conditions and consumer behavior. Ikea's decision to slash prices on thousands of products reflects easing cost pressures and a strategy to attract cost-conscious consumers. This aligns with the broader trend seen during the Black Friday period, where UK retailers increased discounts in response to customers cutting spending. M&S's extension of its price lock on essential food items until Easter further underscores retailers' efforts to address ongoing cost of living concerns. These actions collectively demonstrate how major retailers are responding to inflationary pressures and shifting consumer priorities, balancing the need to maintain sales volume with the challenges of a price-sensitive market. The varying strategies across different retail sectors highlight the complex nature of the UK's economic recovery and the nuanced approaches businesses are taking to navigate this period.

UK: cost of living crisis shows signs of receding as stores try to lure back bargain hunters