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Shop price inflation slows despite rising food costs

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New reports show that world food prices are still at particularly high levels and are expected to remain so into next year, but UK food inflation only increased slightly in May according to the British Retail Consortium (BRC) and Nielsen.

Data from their monthly index indicates that food inflation was up from 4.7 per cent in April to 4.9 per cent in May, while overall shop price growth was down 0.2 per cent to 2.3 per cent.

BRC Director General Stephen Robertson said that wheat and oil were up 72 and 50 per cent year-on-year respectively, although non-food inflation was down to 0.8 per cent reflecting low demand and the need for retailers to use promotions to generate sales.

“Overall shop price inflation fell to 2.3 per cent, almost half the Consumer Price Index, showing rising utility and insurance costs are hitting households much harder than shop prices,” he added.

The findings come after the Food & Agricultural Organisation (FAO) of the United Nations’ yesterday published its Food Outlook report, which noted that a sharp rundown on inventories and modest production increases for the majority of crops is keeping prices high.

Earlier this year international food prices soared to levels last seen in the 2007/08 food crisis, and only dropped by one per cent in May to leave them 37 per cent higher than the same month last year.

Unforeseen international incidents such as the earthquake in Japan and political unrest in North Africa and the Middle East, as well as droughts in several food producing nations, has had a major impact on prices during 2011.

Commenting on the UK market, Senior Manager of Retailer Services at Nielsen Mike Watkins said: “Food prices have increased slightly this month but this is due to seasonal or weather related fresh foods rather than ambient foods.

“However, inflation and other rising household bills are still top of mind for shoppers so retailers are offering more promotions and deeper price cuts.

“This continues to be an important driver of sales for retailers and a coping strategy for shoppers but should not be seen as the long-term answer to any weakening of consumer demand or falls in consumer confidence.”

The FAO report says that the next few months will be crucial in determining how major crops fare in 2011. Any further shortages, combined with rising demand, could see additional increases in global food prices across the world later this year.

Published on Wednesday 08 June by Editorial Assistant

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