Cost of food pushes up shop price inflation

Shop price inflation was up in August, fuelled by the highest rises in food costs in more than a year, according to the latest retail figures.

The British Retail Consortium (BRC)/Nielsen shop price index found that overall inflation rose from 1.5% in July to 1.7% in August, in comparison to the same months last year. This was mainly due to food inflation rising to 3.8% in August - the highest it has been since July 2009.

Meanwhile, non-food inflation slowed from 1.0% in July, to just 0.5% last month.

BRC director-general Stephen Robertson said that the situation was "nowhere near the return of the double-digit food inflation of two years ago", pointing out that, despite its recent rise in cost, wheat is currently "over a third cheaper than its peak in 2008, while oil prices are virtually half of what they were back then".

Mike Watkins from Nielsen retail services pointed to several contributing factors to the slight overall increase, including the weather, seasonal food inflation, the end of early summer promotions and discounting, and the knock-on effect of some commodity price increases.

Despite this matrix of factors, he said that retailers would soon be implementing measures in order to keep customers spending their money.

"As shoppers return from their summer holidays many will review household budgets again and we can expect to see retailers putting together some strong autumn promotions to tempt shoppers to maintain spending on the high street," Watkins added.

Sales growth 'masking uncertainty'

Meanwhile, the BRC's latest retail sales monitor, produced with professional services provider KPMG, revealed that like-for-like sales rose by 1.0% last month. This was largely down to back-to-school sales, the group says, along with the onset of autumn which is boosting general clothing and footwear sales.

However, Robertson tempered the good news, saying that the rise only came in comparison to a "very poor" August 2009, and highlighting that last month's sales "were often deal-driven".

He also drew attention to the "anxiety about job cuts and tax rises", saying that this is deterring people from making major spending commitments, while weakness in the housing market was impacting upon furniture and flooring sales.

"With the Government about to detail its cuts and a VAT rise in prospect, retailers will be hoping consumer confidence doesn't slip over the next few months," Robertson added.

IMAGE Danny Lawson/PA Wire

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