Shop price inflation set to hit consumers as retailers finally pass on costs

Helen Cahill
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Prices have been falling for four years (Source: Getty)

Shop price inflation is set to hit the high street in the next three months as non-food retailers start putting up their prices.

Overall shop prices fell 0.3 per cent in June, according to the British Retail Consortium (BRC), but the industry body has said the index could return to inflation in the next three months.

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Strong competition in the retail sector has weighed on prices, but inflationary pressures could result in price inflation hitting two per cent in the coming months.

Shop prices have been falling since May 2013, but inflationary pressures will finally start to hit consumers as retailers pass on costs relating to the fall in the value of the pound.

Rachel Lund, head of retail insight and analytics at BRC, said:

So far we’ve seen most of the upward pressure in food. We’re likely to see more of an impact on non-food sectors as we move into the autumn as more hedging contracts expire and more stock bought post-referendum reaches the shop floor.

Clive Black, analyst at Shore Capital, said he expected food inflation to plateau, and that further prices rises will come from non-food retailers.

"Food is a much faster market than non-food, so prices tend to come through much quicker," he said. "Mid-market retailers, such as Debenhams, are probably still going to find life quite challenging."

Retailers would have to "work even harder to maintain profitability", he added.

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