The softer-than-expected BRC print will provide modest comfort to Bank of England rate-setters looking for evidence that consumer price pressures are easing, though the data covers a narrower basket than the official CPI measure and is unlikely to move the needle materially on rate expectations alone. The divergence between firm-level trading optimism and weaker economy-wide confidence in the Lloyds survey suggests businesses are managing their own books reasonably well even as the macro backdrop deteriorates, a nuance that complicates the BoE’s read on demand conditions. Manufacturing’s 10-point confidence collapse to its lowest relative to its 12-month average is the sharpest warning signal in the data and points to ongoing vulnerability in the goods-producing sector. Sterling may find limited support from the benign inflation print but the Lloyds data is unlikely to generate sustained upside momentum.
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UK shop price inflation held at 1.2% in June, below forecasts, as food costs eased and summer promotions cushioned non-food prices, while a Lloyds survey showed business confidence falling for a third consecutive month.
Summary:
- UK BRC shop price inflation held at 1.2% year-on-year in June, below the 1.3% consensus forecast and unchanged from May
- Food price inflation slowed to 2.4%, its lowest since March 2025, with fresh food falling to 2.8% from 3.4% in May, aided by strong strawberry harvests and warm-weather promotional activity
- Non-food prices rose 0.6% annually in June, a slight acceleration from 0.5% in May, as summer clothing and footwear deals partially offset broader pressures
- BRC Chief Executive Helen Dickinson warned that retailers face rising cost pressures from higher National Insurance contributions, a packaging tax, and elevated input costs linked to extreme weather and geopolitical tensions
- Lloyds Bank’s June business confidence survey showed overall confidence falling 3 points to +44, below its 12-month average of +47, with economy-wide confidence dropping 4 points to +31
- Manufacturing confidence recorded the sharpest deterioration, falling 10 points to +33 against a 12-month average of +46, though hiring intentions rose for the first time in three months
- Firms’ own trading outlook dipped 2 points to +56 but remained close to its 12-month average, with 64% of businesses expecting stronger output over the coming year
British shop price inflation held steady at 1.2% in June, coming in below expectations and unchanged from May, as cooling food costs and summer promotional activity offset a modest acceleration in non-food prices, the British Retail Consortium reported on Tuesday.
The BRC’s monthly survey of major retail chains, based on data collected in the first week of June, showed food price inflation easing to 2.4%, its lowest reading since March 2025, down from 2.7% in May. Fresh food prices rose 2.8% on the year, a meaningful deceleration from the 3.4% recorded the previous month, driven in part by an unusually abundant strawberry harvest and retailer promotions on ice cream and chilled products as Britain experienced a spell of hot weather. Non-food prices edged higher, rising 0.6% annually compared with 0.5% in May, as discounting on clothing and footwear ahead of the summer season was insufficient to pull the overall reading lower.
The benign headline print nonetheless came with a pointed warning from the BRC. Chief Executive Helen Dickinson said competitive pressure is currently containing inflation at the consumer level, but that retailers are absorbing a growing stack of cost increases including higher National Insurance contributions, a new triple packaging tax, and elevated input costs driven by extreme weather events and the ongoing geopolitical disruption stemming from the Iran conflict. Those pressures, she cautioned, will not remain invisible to the consumer indefinitely.
The BRC measure covers a narrower range of goods than Britain’s official consumer price index, which held at a 13-month low of 2.8% in May, but the two data series are broadly consistent in signalling a gradual easing of price pressures at the consumer level.
A separate survey released on the same day by Lloyds Bank pointed to more uneven conditions across the business community. Overall business confidence fell 3 points to +44 in June, slipping below its 12-month average of +47, according to online polling of 1,200 firms conducted by Ipsos between June 1 and June 15. Confidence in the broader economic outlook fell more sharply, dropping 4 points to +31 against a 12-month average of +38.
The deterioration was most pronounced in manufacturing, where confidence fell 10 points to +33, well below the sector’s 12-month average of +46, reflecting the combined weight of cost pressures, global uncertainty and supply chain disruption. Internationally exposed firms were a notable exception, with Lloyds reporting that companies with significant overseas operations were considerably more upbeat, citing easing supply chain conditions and strengthening customer demand in foreign markets.
Firms’ assessments of their own trading prospects were more resilient than their economy-wide views, with the net balance of trading optimism falling only 2 points to +56, close to its 12-month average, and 64% of businesses still expecting stronger output in the year ahead. Hiring intentions rose for the first time in three months, offering a tentative signal that labour demand has not yet turned decisively lower despite the softening macro mood.
