Consumers hit as oil inflates UK food prices

Tim Wallace
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FOOD price inflation started rising again in March after five months of falls, according to data published today, as increased oil and fuel costs pushed up transport expenses.

However, non-food prices were lower than in the same month of 2011, as weak consumer demand forced firms to cut prices to battle for attention on the high street.

Shop prices rose 1.5 per cent in the year to March, up from 1.2 per cent in February, according to the British Retail Consortium’s shop price index .

The rise was led by food prices, which rose 5.4 per cent on the year, up from 4.2 per cent in the year to February.

“The cost of oil has shot up eleven per cent since the start of the year and that has driven up transport and manufacturing costs, increasing food inflation,” said BRC boss Stephen Robertson.

However, he insisted shops are trying to reduce costs, claiming “retailers are shifting away from multi-buy reductions on specific items in favour of money-off coupons for an entire shop, giving customers more flexibility and producing savings on food shopping which don’t show up in this index.”

Non-food prices fell at their fastest pace for 28 months, falling 0.9 per cent compared with March 2011 – a steeper fall than the 0.7 per cent the month before.

Clothing and footwear led the decline, falling 1.5 per cent on the month – the fastest fall since June 2009 and taking the annual decline to 6.5 per cent.

Falling cotton values pushed prices down, the BRC reported – the commodity is down 55 per cent on the year – though widespread discounting also helped consumers.

Electricals closely followed, with prices down 4.7 per cent on the year, while health and beauty prices fell 0.4 per cent on the month.

Despite those declines, consumers remain hard-pressed, and spending is under pressure.

“Consumers are having to cope with falling disposable incomes with fuel and household energy costs also increasing since the start of the year,” said Nielsen’s Mike Watkins.

“With inflationary pressure continuing in the food supply chain we can expect supermarkets to keep a strong focus on promotional activity over the next few months. Shoppers are following the deals and will continue to seek out the best value for money.”