The BRC-NielsenIQ Shop Price Index has risen for the fifth consecutive month as retailers and manufacturers pass on higher costs.
The rate of shop price inflation accelerated to 2.1% in March, up from 1.8% reported in February, marking the highest figure recorded by the analysis since September 2011 and following similar trends in the wider economy.
The index is based on price changes of a basket of 500 essential goods, half of which are food items. It does not include utilities, fuel or any other categories used in the consumer prices index, the headline measure of inflation.
The BRC-NielsenIQ data showed that food inflation rose to 3.3% in March, up from 2.7% the month before and the highest rate since March 2013. Fresh food inflation increased 3.5%, up from 3.3%, and ambient food inflation rose 3%, up from 2%.
A separate analysis released yesterday by Kantar put grocery price inflation at 5.2%, its highest level since April 2012. Industry analysts have warned that food price inflation could rise above 10% by the end of the year as the war in Ukraine impacts energy costs and affects the price of grain and food oils.
In non-food, the BRC-NielsenIQ data showed that inflation had accelerated to 1.5% in March, up from 1.3% in February. This marks the highest rate of inflation since February 2011.
Helen Dickinson, Chief Executive of the British Retail Consortium (BRC), warned of further rises ahead: “There have been mounting cost pressures throughout the supply chain for some time, including rising wages, input costs, global commodity prices, energy, and transport. Many of these costs are beginning to be exacerbated by the situation in Ukraine, but the full impact on prices is yet to be seen.”
She noted that the Shop Price Index has been rising more modestly than other inflation measures as retailers were able to limit price rises on many essential goods.
“By keeping the prices of key items down and expanding value ranges, retailers are trying to support customers most affected by the cost-of-living squeeze, many of whom will face higher energy prices and National Insurance Contributions from 1 April,” Dickinson said.
“With overall inflation likely to rise even higher according to the Bank of England, consumers will not have an easy ride this year. The war in Ukraine, and volatility in commodity markets is likely to further dampen consumer confidence in the coming months.”
Mike Watkins, head of retailer and business insight at NielsenIQ, also highlighted that the next few months will be a difficult time for consumers: “Rising food prices will start to impact what’s put in the shopping basket so supermarkets will need to adapt ranges to help shoppers manage what they spend on their weekly groceries. Whilst high street retailers will be competing for discretionary spend that’s coming under increasing pressure.”
NAM Implications:
- On balance, it appears that 10% inflation is on its way…
- …with specific timing dependent upon cost increases already in the pipeline.
- Added to which is consumer perception…
- …against a background of job insecurity coupled with Covid and Ukraine induced fear.
- Key that suppliers and retailers factor 10% into their strategies now.
- Rather than have to react to reality later…
