Hard to swallow: food inflation rises for fourth month in a row
Food inflation rose for a fourth consecutive month in May, with the British Retail Consortium (BRC) warning a new packaging tax and the government’s workers’ rights overhaul will fuel further price rises in the coming months.
The cost of food rose by an average of 2.8 per cent year on year in May, up from a rise of 2.6 per cent in April, according to fresh data from the retail industry body.
The upward pressure on prices was most keenly felt in fresh foods, which rose by 2.4 per cent year on year in May against growth of just 1.8 per cent April, while the rising wholesale beef price also acted to push up prices in steaks.
Overall, shop prices remained in deflation. The average basket in May was 0.1 per cent cheaper than a year ago, the same as April’s figure in the monthly BRC-NIQ Shop Price Index.
A flurry of aggressive promotion campaigns has kept shop prices down in recent months, as retailers continue to vie for the custom of increasingly price-sensitive and savvy shoppers.
But there were signs in May’s inflation reading that the period of downward price movement may be coming to an end, as the ill effects of April’s hikes to employer National Insurance contributions (NICs) and minimum wage begin to be felt by bosses.
Prices in the fashion and furniture categories saw fresh upward pressure in May, according to the BRC’s chief executive, Helen Dickinson, thanks to the unwinding of promotional activity.
Meanwhile Donald Trump’s tariff regime pushed the cost of electrical items down for consumers, as retailers looked to get ahead of any price rises that may be necessary should the US President’s 90-day tariff pause come to a sudden halt.
Price rises on the horizon
Dickinson pinned the rise in food prices on the cost burden placed on retailers by the government. She said it was “no surprise that inflation is rearing its head once again” given retailers were now all absorbing the additional £5bn in costs from NICs and living wage hikes.
The lobby group boss also warned that two major policy changes on the horizon for firms will further fan the flames of inflation.
“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,” she said.
“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.”