Food inflation has risen for the fourth consecutive month to a one-year high as retailers battle to absorb higher staff costs.
Data from the BRC-NielsenIQ Shop Price Monitor shows that overall deflation in the retail sector was unchanged in May at 0.1%, with the cost of non-food items falling 1.5%, partly due to electrical retailers cutting prices to drum up business before a potential hit from Donald Trump’s tariffs.
However, food prices rose at an annual rate of 2.8% this month, up from 2.6% in April and the fastest pace since May last year. Fresh food inflation increased to 2.4%, from 1.8% the previous month, driven by items such as steak that got more expensive as wholesale beef prices increased. However, ambient food inflation eased to 3.3% in May, against growth of 3.7% in April.
“With retailers now absorbing the additional £5bn in costs from April’s increased Employer National Insurance contributions and National Living Wage, it is no surprise that inflation is rearing its head once again,” said Helen Dickinson, Chief Executive of the BRC.
“Later this year, retailers face another £2bn in costs from the new packaging tax, and there are further employment costs on the horizon from the implementation of the Employment Rights Bill. Government must ensure the Employment Rights Bill is fit for purpose, supporting workers’ rights while protecting jobs and investment for growth. If statutory costs continue to rise for retailers, households will have to brace themselves for more difficult times ahead as prices rise faster.”
Meanwhile, Mike Watkins, Head of Retailer and Business Insight, at NielsenIQ, noted that increasing food prices were “an extra challenge to consumer spending alongside rising household bills”.
He added: “If consumer confidence remains weak, as looks likely, then retailers may have to work harder to encourage shoppers to spend over the summer.”
NAM Implications:
- The key issue has to be the extent of consumer-in-street perception…
- …that ‘real inflation’ is in excess of these numbers.
- To the extent that cash-strapped consumers are making radical changes in shopping behaviour, i.e switching to own-label equivalents and the discounters in a search for value.
- With more increases to come (new packaging tax, further employment costs re Employment Rights Bill)…
- …it ain’t over yet, not by a mile…
