Shop prices return to inflation as retailers struggle over government costs

Shop price inflation increased to 0.4% year on year in June, against a decline of -0.1% in May. This is above the 3-month average of 0.1%.

Non-Food inflation increased to -1.2% year on year in June, against a decline of -1.5% in May. This is above the 3-month average of -1.4%.

Food inflation increased to 3.7% year on year in June, against growth of 2.8% in May. This is above the 3-month average of 3.1%.

Fresh Food inflation increased to 3.2% year on year in June, against growth of 2.4% in May. This is above the 3-month average of 2.5%.

Ambient Food inflation increased to 4.3% year on year in June, against growth of 3.3% in May. This is above the 3-month average of 3.8%.

Helen Dickinson, Chief Executive of the BRC, said, “Within three months of the costs imposed by last Autumn’s Budget kicking in, headline shop prices have returned to inflation for the first time in close to a year.

“Food inflation showed little sign of slowing down, particularly in fresh produce, where prices of meat have been impacted by high wholesale prices and more expensive labour costs. Meanwhile, fruit and vegetable prices increased due to the hot, dry weather reducing harvest yields. Non-food goods remained in deflation as retailers cut prices across product categories, especially DIY and gardening so customers could make the most of the sunshine.

“Retailers have warned of higher prices for consumers since last year’s Autumn Budget and the huge rises to Employer National Insurance costs and the National Living Wage. We predicted a significant rise in food inflation by the end of this year, and this has been accelerated by geopolitical tensions and impacts of climate change. To limit further rises, Government must find ways to alleviate the cost pressures bearing down on retailers. The upcoming business rates reform offers such an opportunity, and the Government must ensure no shop pays more as a result of the changes.”

Mike Watkins, Head of Retailer and Business Insight, NielsenIQ, said, “Price increases are being driven by broader economic conditions and ongoing changes in the supply chain.

“While the current spell of good weather is helping to boost demand at many retailers, rising prices could become a concern if consumer willingness to spend declines later in the year. Which means we can expect retailers to reinforce their value-for-money messages over the summer.”