Grocery inflation sees shop prices rise even further

The BRC-Nielsen monthly shop price index showed shop price annual inflation accelerated to 4.4% in July, up from 3.1% in June - above both the 12- and six-month average price increases of 1.5% and 2.8%, respectively.

It marked the highest rate of shop price inflation since the index first started in 2005, the British Retail Consortium said.

“Consumers’ household budgets are coming under increasing strain and shelf price increases in both food and non-food have accelerated in recent weeks as more cost price increases come through the supply chains,” said Mike Watkins, head of retail and business insight at NielsenIQ.

“The grocery industry in particular is under intense pressure as retailers try to shield customers from the full impact of inflation.

“At the same time there has been an increase in competitive intensity so customer retention over the summer holiday season will be key to help stem any further fall in volumes.”

Food inflation strongly accelerated to 7.0% in July, up from 5.6% in June - the highest inflation rate since May 2009.

Non-food inflation, meanwhile, rose to 3.0% in July from 1.9% in June, making for a new record high, beating the previous record of 2.2% in April.

The BRC said fresh food inflation accelerated “strongly” in July to 8.0%, from 6.2% in June, to reach the highest inflation rate since May 2009.

Finally, ambient food inflation hastened to 5.7% from 4.8% in June to reach the fastest rate of increase since April 2012.

“July saw the highest rate of shop price inflation since our index began in 2005, as heightened cost pressures continued to filter through to customers,” said BRC chief executive Helen Dickinson.

“Rising production costs - from the price of animal feed and fertiliser to availability of produce, exacerbated by the war in Ukraine - coupled with exorbitant land transport costs, led food prices to rocket to seven percent.

“Some of the biggest rises were seen in dairy products, including lard, cooking fats and butter.”

Meanwhile, Dickinson said non-food prices were hit by rising shipping prices, production costs and continued disruption in China.

“As inflation reaches new heights, retailers are doing all they can to absorb as much of these rising costs as possible and to look for efficiencies in their businesses and supply chain.

“With households enduring a cost-of-living crunch, retailers are expanding their value ranges to offer the widest variety of goods to those most in need, providing discounts to vulnerable groups, and raising staff pay.

“Nevertheless, households and businesses must prepare for a difficult period as inflationary pressures hit home.”

Reporting by Josh White at Sharecast.com.