Data published by the British Retail Consortium (BRC) shows food inflation in the UK hit a five-month high last month, driven by rises in the price of breakfast items such as butter, cheese, bread, eggs, and cereal.
The BRC-NielsenIQ Shop Price Index shows the annual rate rose to 2.1% in February, up from 1.6% in January, marking the first time it has gone above 2% since September last year. Fresh food inflation increased to 1.5%, up 0.9% the previous month, while ambient food accelerated from 2.5% to 2.8%.
In recent months, major supermarkets have warned that food prices will have to increase to offset rises in the national living wage and employers’ national insurance contributions, which take effect in April. New recycling regulations that come into force in October are also expected to add to cost pressures in the sector.
The BRC is forecasting that food inflation will surpass 4% by the second half of the year.
Meanwhile, in non-food, deflation was 2.1% compared to a decline of 1.8% in January. The BRC noted month-on-month prices rose as January sales promotions ended, especially in electricals and furniture. However, discounting remained widespread in the fashion sector as retailers tried to entice shoppers against a backdrop of weak demand.
The overall BRC-NielsenIQ Shop Price Index was unchanged at -0.7% year-on-year.
“Inflation will likely rise across the board as the year progresses with geopolitical tensions running high and the imminent £7bn increase in costs from the Autumn Budget and the new poorly designed packaging levy arriving on the doorsteps of retailers,” said Helen Dickinson, Chief Executive of the BRC.
“If Government wants to keep inflation at bay, enable retailers to focus on growth, and help households, it must mitigate the swathe of costs facing the industry. It can start by ensuring no shop ends up paying more than they already do under the new business rates proposals, and delaying the new packaging taxes.”
Mike Watkins, Head of Retailer and Business Insight at NielsenIQ, added: “With many household bills increasing over the next few weeks, shoppers will be looking carefully at their discretionary spend and this may help keep prices lower at non-food retailers. However the increase in food inflation is likely to encourage even more shoppers to seek out the savings available from supermarket loyalty schemes.”
Official inflation data for February is due to be published on 26 March.
NAM Implications:
Despite assurances of official stats…
…savvy yet sceptical consumers still perceive food inflation to be greater than claimed.
And with 2024 budget cost increases yet to hit the market…
…consumers are understandably cautious.
With realistic businesses adjusting budgets accordingly…
