Food inflation up 5.7%

Food inflation soared to 5.7% last month - up from 4.9% in May, a survey has revealed today.

The study by the British Retail Consortium (BRC) said the figure was being heavily impacted by global commodity shortages and weather related issues. BRC also said that over a third of all food goods were being bought while on promotion.

The huge increase in food inflation has prompted fears for onsumer price index (CPI) figures, released later this month. CPI inflation stands at 4.5 per cent and is widely expected to hit 5% this year.

Stephen Robertson, British Retail Consortium Director General, said: “Household budgets are under pressure. Real disposable incomes have dropped the most in 34 years but increasing petrol and energy bills plus low wage rises are the main causes.

“Shop prices are going up much more slowly than the wider Consumer Prices Index. Overall shop price inflation is being driven by surging world commodity prices, the effect of the weak pound on import costs and higher VAT – all beyond retailers’ control.

“Headline food inflation is up, but 39 per cent of grocery spending is going on promoted goods, showing there are lots of offers available and savvy shoppers are taking advantage to minimise the impact on real-life bills.”

He added: “The latest bout of retail administrations shows how weak consumer spending is. Retailers are using discounts to generate sales at the expense of margins. Sales have started earlier this year, especially in clothing and footwear, where prices are actually cheaper than a year ago.”

Mike Watkins, senior manager, retailer services, Nielsen, added: “Retailers have responded by maintaining the historically high level of promotions which is helping shoppers to cope with falling household income. With shoppers indicating that they are becoming even more cautious about spending, this will impact discretionary spend further so all retailers will have to keep a focus on managing any cost price increases over the next six months.”

>>Inflation shock brought on by food prices

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