Food inflation surges amid lowest overall deflation in 8 months

grocery sector

Overall shop prices decelerated at the lowest rate in eight months, primarily due to a surge in food prices as the cold spring and recent heatwave affected fruit and vegetable prices.

According to the BRC-Nielsen Shop Price Index, food inflation rose to 1.6 per cent in July from the 1.2 per cent seen in June and May.

Fresh food prices heavily affected overall food inflation, surging 1.2 per cent in July compared to 0.8 per cent in June, while ambient food inflation increased 2.2 per cent in July from 1.6 per cent in June.

Overall, shop prices fell by 0.3 per cent, slowing from 0.5 per cent the month before.

This is the 63rd month of overall shop price deflation and the lowest rate since December 2017.

July also saw non-food items reach their lowest level of deflation since December 2017 at 1.4 per cent in July from 1.6 per cent in June.

The British Retail Consortium (BRC) said it expected the hot, dry conditions to result in pressure on prices “for some time to come”.

“We expect this period of food price inflation to continue in coming months as despite global oil, food and commodities prices shrinking recently, the hot, dry conditions we have seen across the northern hemisphere means the pressure on prices will continue for some time to come,” BRC chief executive Helen Dickinson said.

“These global pressures on food prices in particular are yet further demonstration of the need for an agreement on the backstop to ensure frictionless trade is maintained after the 29 March 2019 if retailers are to maintain value and choice for consumers.”

Nielsen head of retailer insight Mike Watkins said: “The slight increase in food inflation over the early summer has been offset by increased demand for food and drink as the result of the heatwave and incremental spend around the World Cup.

“Looking ahead, with weather related changes in commodity markets anticipated, fluctuating currencies and wavering consumer spending, retailers still need to minimise price increases, as the underlying trading conditions across the retail industry remain challenging.”

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