Retailers admit they are continuing to pass on higher energy and labour costs to customers as a surge in the cost of food led to a sharp rise in shop prices over the past month.
Shop price inflation increased to 0.7% year on year in July, against growth of 0.4% in June. This is above the 3-month average of 0.3%.
Food inflation increased to 4% year, against growth of 3.7% last month and above the 3-month average of 3.5%.
The data from the British Retail Consortium (BRC) and NielsenIQ indicated that discounts in fashion and furniture were among the few positives for hard-pressed consumers.
Wholesale prices for meat and tea were affected by more constrained global supplies. Fresh food inflation remained broadly level month-on-month at 3.2%.
The rise in the cost of food has prompted further warnings to the Chancellor against any further tax rises.
Helen Dickinson, chief executive of the BRC, said that the government should “think carefully” about the autumn budget, as retailers were already feeling the strain from increases to employer national insurance contributions announced last October.
“Retailers are doing everything possible to protect their customers from the worst of the inflationary pressures but the £7 billion cost to retail of last year’s budget forced most retailers to raise prices,” she said. “Further tax rises will ultimately hurt households, locking in inflation and forcing people to pay higher prices to put food on the table.”
Mike Watkins, head of retailer and business insight at NIQ, said food retailers were seeing price increases above the consumer prices index, which measures price changes over time for consumers.
David Lonsdale, director of the Scottish Retail Consortium, added: “It’s too early to say if the spike in shop price inflation, especially for groceries, has crested.
“Retailers are striving to keep down prices for customers. However, the sheer weight of statutory costs bearing down on the retail sector and its supply chain is proving difficult to absorb and unfortunately this is having to be passed on.”
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