UK shop prices report record highs but peak still to come

Food inflation in supermarkets is currently at its highest rate since records began

The increase in food inflation will put further pressure on household budgets. PA

Inflation accelerated in January in the UK, sending shop prices to a record high, though experts warn the peak has yet to come.

Prices have increased 8 per cent since last January, up from 7.3 per cent in December and above the three-month average of 7.5 per cent, according to the British Retail Consortium-NielsenIQ Shop Price Index.

Overall food inflation reached the highest rate in the category on record, rising 13.8 per cent from 13.3 per cent in December.

Fresh food inflation also reached a record high due to increased production costs as well as elevated fruit and vegetable prices, accelerating to 15.7 per cent from 15 per cent in December.

Ambient food inflation saw the fastest increase on record as wholesale and bulk prices rose, particularly for sugar and alcohol, accelerating to 11.3 per cent from 11 per cent in December.

Meanwhile, clothing and footwear prices eased, allowing consumers to replenish their wardrobes during the January sales.

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“Retail prices rose in January as discounting slowed and retailers continued to face high input costs,” BRC chief executive Helen Dickinson said.

“With global food costs coming down from their 2022 high and the cost of oil falling, we expect to see some inflationary pressures easing.

“However, as retailers still face ongoing headwinds from rising energy bills and labour shortages, prices are yet to peak and will likely remain high in the near term as a result.”

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“Consumer demand is likely to be weak in the first quarter due to the impact of energy price increases and, for many, Christmas spending bills starting to arrive,” said Mike Watkins, head of retailer and business insight at NielsenIQ.

“So the increase in food inflation is going to put further pressure on household budgets and it’s unlikely that there will be any improvement in the consumer mindset around personal finances in the near term.

“With shoppers having less money to spend on discretionary retail having paid for their essential groceries, there will be little to stimulate demand across the non-food channels.”