Most retailers absorbed shop price inflation on behalf of their customers last month, according to British Retail Consortium (BRC) Director General Stephen Robertson.
The latest research from the BRC and Nielsen shows that overall shop price inflation grew from 2.1 to 2.5 per cent between December and January, but Robertson said the retail industry will struggle to continue taking the hit.
“Rising commodity prices continue to push up food inflation, now to its highest for a year and a half,” he explained.
VAT rose from 17.5 to 20 per cent at the start of January, but the tax hike had a limited impact on shop prices during the month as the retail landscape was dominated by special offers and other measures to encourage consumers to keep spending after the festive season.
“Poor Christmas trading left retailers with stock to shift,” Robertson continued.
“The impact of the VAT increase was almost entirely lost among the unusually high number of post-Christmas discounts and promotions.”
BRC and Nielsen’s Shop Price Index for January showed that food inflation accelerated 0.6 per cent to 4.6 per cent in the month, while non-food inflation grew by 0.2 per cent to 1.3 per cent.
Mike Watkins, Senior Manager of Retailer Services at Nielsen, remarked: “Inflationary pressures continue, in particular in food which is why the promotional discounts given by food retailers still remain at an all time high.”