Rising fresh food prices push UK inflation higher for fourth month

Food prices in the UK rose for the fourth consecutive month in May, according to the latest data from the British Retail Consortium (BRC), with fresh food inflation driving the increase.

Annual food inflation reached 2.8 percent in May, up from 2.6 percent in April, and above the three-month average of 2.6 percent. Fresh food prices saw a sharper jump, rising by 2.4 percent compared to 1.8 percent in April. However, ambient food inflation – which includes shelf-stable products – slowed slightly to 3.3 percent, down from 3.7 percent the previous month.

“While overall shop prices remain unchanged in May, food inflation rose for the fourth consecutive month. Fresh foods were the main driver, and red meat eaters may have noticed their steak got a little more expensive as wholesale beef prices increased,” said Helen Dickinson, Chief Executive of the BRC.

The broader picture for UK retail pricing was relatively stable. Shop price deflation remained at 0.1 percent year-on-year, matching April’s figure, while non-food deflation stood at 1.5 percent, a slight increase from April’s 1.4 percent.

Risk of further food inflation ahead

Retailers are feeling the squeeze from mounting statutory costs, which is likely to impact prices moving forward.

“With retailers now absorbing the additional £5bn in costs from April’s increased Employer National Insurance contributions and National Living Wage, it is no surprise that inflation is rearing its head once again,” Dickinson added.

“Later this year, retailers face another £2bn in costs from the new packaging tax, and there are further employment costs on the horizon from the implementation of the Employment Rights Bill.”

Mike Watkins, Head of Retailer and Business Insight at NielsenIQ, warned that promotional discounts may only go so far. “Whilst shoppers are seeing savings at the checkout as retailers increase promotional activity, increasing prices is still an extra challenge to consumer spending alongside rising household bills,” he said.

“And if consumer confidence remains weak as looks likely, then retailers may have to work harder to encourage shoppers to spend over the summer.”