Shop price inflation reaches two year high

Shop price inflation accelerated to 1.5% in August from 0.9% in July, reaching its highest level in two years, according to British Retail Consortium figures.

The data shoed that food inflation rose to 2.8% from 2.2%, with ambient food prices climbing 2.5% as higher energy, commodity and input costs increasingly filtered through supply chains. Fresh food inflation eased slightly to 3%. Non-food inflation increased to 0.9%, partly driven by higher electrical prices as booming AI demand pushed up memory chip and storage costs.

Non-Food inflation increased to 0.9% year on year in August, against growth of 0.2% in July. This is above the 3-month average of 0.6%. Fresh Food inflation decreased to 3.0% year on year in August, against growth of 3.1% in July. This is in line with the 3-month average of 3.0% whilst ambient Food inflation increased to 2.5% year on year in August, against growth of 1.1% in July. This is above the 3-month average of 1.8%.

Helen Dickinson, Chief Executive of the BRC, said “Shop price inflation rose to its highest level in over two years, albeit well below the headline Consumer Price Index. The impact of higher energy, input and commodity costs is beginning to filter through into prices, particularly for ambient foods which are typically imported and processed. In non-food, electrical prices rose amid the ongoing AI boom, which is forcing up the price of memory chips and storage. Meanwhile, retailers kept clothing prices low to offer value for families getting ready for the new school year.”

“The months ahead look challenging for households, with rising bills putting further pressure on budgets. Retailers are facing persistently high operating costs, limiting their ability to absorb further increases without impacting investment, jobs and prices. If the Government is serious about supporting growth while keeping the cost of living in check, it must address the cost of doing business, including by tackling the growing burden of business rates, packaging and employment taxes.”

Mike Watkins, Head of Retailer and Business Insight, NIQ, said “While the increase in both food and non-food inflation is not unexpected, particularly as some of the summer promotional activity seen in recent months comes to an end, retailers continue to keep prices low, helping consumers manage rising household costs such as energy and fuel. However, pressures are continuing to build across supply chains, and we can expect price competition to intensify as we move into the autumn months.”