Mounting cost pressures up and down food supply chains meant shop price inflation accelerated to a new high during August.
Data from the British Retail Consortium (BRC) and NielsenIQ showed annual inflation in shops increased to 5.1% in August, up from 4.4% in July – the highest since 2005 when the index started.
The surge was again driven by food as producers passed on increases in the cost of fertiliser, wheat and vegetable oils caused by the war in Ukraine. The overall rate rose to 9.3% from 7% in July, with fresh food inflation climbing from 8% to 10.5%, the highest level since September 2008. Ambient food inflation increased from 5.7% to 7.8%. Products such as milk, margarine and crisps saw some of the biggest rises.
Increasing food prices more than offset a slight decline in non-food inflation from 3% in July to 2.9% this month.
The rise in shop prices adds further pressure on households already struggling to cope with the prospect of much higher household energy bills in the month ahead.
Helen Dickinson, Chief Executive of the BRC, said: “The rise in shop prices is playing into wider UK inflation, which some analysts are predicting could top 18% in 2023. The situation is bleak for both consumers and retailers, but retail businesses will remain committed to supporting their customers through offering discounts to vulnerable groups, expanding value ranges, fixing prices of essentials, and raising staff pay.
“However, as retailers also grapple with growing cost pressures, there is only so much they can shoulder. The new Prime Minister will have an opportunity to relieve some of the cost burden bearing down on retailers, like the upcoming increase in business rates, in order to help retailers to more to help their customers.”
Mike Watkins, Head of Retailer and Business Insight at NielsenIQ, added: “Inflation continues to accelerate and shoppers are already cautious about how much they spend on groceries, with a fall in volume sales at supermarkets in recent months.
“We can expect this level of food inflation to be with us for at least another six months, but hopefully some of the input cost pressures in the supply chain will eventually start to ease. However, with further falls in disposable incomes coming this autumn as energy costs rocket again, retail spend will come under pressure in the all-important final quarter of the year.”
