Food prices hit an almost four-year high last month, the latest British Retail Consortium (BRC)-Nielsen Shop Price Index shows.
Pressures from commodities and the fall in sterling in the wake of the Brexit referendum continued to feed through the supply chain, pushing food inflation up to 2.2% over the year to September.
Helen Dickinson, chief executive of the BRC, said: “A global milk shortage has pushed up butter prices, while rising global cereal prices earlier in the year are now feeding onto shop shelves.
“At the same time we are starting to head out of the UK season for some vegetables and, as we flagged last month, that means enhanced exposure of food prices to the sterling exchange rate.”
Consumers and businesses needed the government to reach prompt agreement with the European Union on the terms of a Brexit transition to ensure they were not faced with a cliff-edge scenario that could mean tariff-related price increases on top of those they were already paying, she said.
Mike Watkins, head of retailer and business insight at Nielsen, said inflation was expected to peak over the next few months.
Richard Lim, chief executive of Retail Economics, said the least affluent households would be hit hardest because they spent a much higher proportion of their expenditure on food.
“The knock-on consequence is for discretionary spending to be squeezed even further in the coming months.”
He said that from a retailer point of view, these added pressures were coming at a time when operational costs were spiralling.
“Rising staff wages, business rates and retail rents are heading higher while the consumer backdrop continues to soften.”
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