UK Retail Prices Drop for First Time Since March as Food Discounts Ease Inflation Ahead of Halloween

UK high street prices fell in October for the first time since March, providing a fleeting relief to consumers and policymakers. Industry figures indicated overall retail prices fell 0.3% compared to the previous month, as food prices fell 0.4%—the largest one-month decline since December 2020. Relief comes at Halloween time, with chocolate and confectionery reduced by falling global sugar prices.

Month-to-month, retail prices went up by 1.0%, less than the 1.4% rate in September, the initial year-on-year deceleration since June. Inflation within food also fell to 3.7% from 4.2%, while prices of fresh food continued to rise. Stores have begun early promotions on electronic items and cosmetics prior to November's Black Friday offers, making it more competitive and driving prices down.

The Bank of England is closely monitoring food prices, which are a key driver of public inflation expectations. The UK's headline inflation rate stuck at 3.8%, lower than forecast, gave policymakers a bit of breathing space on interest rates.

Retail managers have urged the government to avoid lifting industry taxes in the next budget, forecasting this will reverse recent gains and prolong inflation pressures. As living expenses are on the policy agenda, the balancing act between fiscal policy and consumer respite is delicate.