LONDON, (Reuters) - - British shop prices fell in May by the most since the start of last year, according to a survey released on Wednesday, adding to signs that a rise in inflation after the 2016 Brexit vote has peaked.
Overall shop prices fell by 1.1 percent in year-on-year terms, making May the 61st month of prices declining, data from the British Retail Consortium (BSC) showed.
The BRC’s survey highlighted a widening gap between rising prices for food and falling prices for other goods.
Prices of non-food items fell by the most since August 2016, down 2.5 percent in year-on-year terms in May, while food inflation picked up to 1.2 percent from 1.0 percent in April.
“While food inflation has increased this month as the weather, oil price and other geo-political factors have influenced global agricultural markets, we expect overall prices to fall in the coming months,” BRC chief executive Helen Dickinson said.
Last week, Bank of England Governor Mark Carney said inflation would probably rise slightly in the coming months before resuming a decline.
The BoE has said it expects to raise interest rates gradually over the next three years.
British inflation rose sharply after the 2016 referendum decision to leave the European Union which pushed down the value of the pound, but the impact of the weaker currency was diminishing, the BRC said.
Consumer spending has been squeezed for more than a year by above-target inflation.
The Confederation of British Industry said consumer-focused businesses like hotels and restaurants had reported a fall in sales over the past three months in its latest survey, also published on Tuesday. But business and professional services enjoyed the fastest growth since August 2015.
“For all services, rising costs are exerting pressure on margins, but in business and professional services, sales volumes are helping profitability to kick in,” CBI chief economist Rain Newton-Smith said.
Reporting by Coran Elliott, editing by William Schomberg