UK shop price growth back to normal, retailers say

LONDON (Reuters) - Prices in British shops rose at the slowest pace in 2-1/2 years this month, according to the British Retail Consortium which said the rate of inflation in the sector was back to normal after its surge.

In a latest sign of easing inflation pressure that will be welcomed by the Bank of England, annual shop price inflation slowed to 0.6% in May from 0.8% in April, the smallest increase since November 2021, the BRC said.

Prices for non-food goods fell by 0.8% in annual terms after a 0.6% drop last month.

Food inflation slowed for a 13th month in a row to 3.2% from 3.4%, its lowest since February 2022.

"After a number of months of falling input prices, we are now seeing food inflation stabilise and retailers continue to pass on price cuts to shoppers," said Mike Watson, head of retailer and business insight at NielsenIQ, which provides data for the BRC.

"Whilst inflationary pressure has eased and there is some improvement in shopper sentiment, the unseasonable weather has dampened retail sales so lower prices look set to continue and promotional activity is likely to increase (and) drive demand."

The BoE is considering when it should cut interest rates for the first time since 2020. It is focusing in particular on prices in Britain's service sector which are running at close to 6% in contrast to the sharper cooling of growth in goods prices.

(Reporting by William Schomberg; Editing by Kim Coghill)