Shop prices driven up by food inflation

 
Julian Harris
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WORLD ECONOMY

FOOD inflation in British shops rocketed to 5.7 per cent in June from 4.9 per cent in May, a survey by the British Retail Consortium (BRC) unveiled today.

Food costs pushed overall shop price inflation to a 32-month high of 2.9 per cent in June – a dangerous signal ahead of the official consumer price index (CPI) figures, released later this month. CPI inflation stands at 4.5 per cent and is widely expected to hit five per cent this year.

Food prices are also to blame for a jump in inflation across peer countries, according to the Organisation for Economic Development and Co-operation (OECD).

Inflation across the OECD rose to 3.2 per cent in May, from 2.9 per cent the previous month, the Paris-based group said yesterday.

Food prices in OECD member states were 3.9 per cent higher in the year to May, up from 3.1 per cent in April.

Figures released yesterday in Taiwan demonstrated the wide effects of rising food prices. CPI inflation in Taiwan reached 1.93 per cent in June, compared to 1.65 per cent in May. Food inflation reached 3.34 per cent in the Chinese-governed state.

“The continued increase in the price of food being driven by wider economic conditions such as global commodity prices and weather related supply changes,” said Mike Watkins of the BRC.

“Headline food inflation is up, but 39 per cent of grocery spending is going on promoted goods, showing there are lots of offers available and savvy shoppers are taking advantage to minimise the impact on real-life bills,” Watkins added.

Inflation among non-food items in UK stores also spiked, reaching 1.3 per cent last month – up half a percentage point from May.

Total shop prices were also up half a per cent, from May to June. “Overall shop price inflation is being driven by surging world commodity prices, the effect of the weak pound on import costs and higher VAT,” the BRC said.