Cash-strapped consumers were hit with a seven per cent rise in food prices last month as shops hiked the cost of goods by their highest rate for at least 18 months, a survey has revealed.
The British Retail Consortium (BRC) shop price index showed that price tags across the board rose by 2.5 per cent year-on-year in June, pushed higher by the rocketing food costs.
Shoppers also faced the first increase in the cost of non-food goods since the survey began in December 2006, according to the BRC. The results will make grim reading for Bank of England policymakers, who are expected to leave rates on hold at five per cent this week as mounting data signals no let up in inflationary pressures.
The BRC figures show that annual food price inflation has jumped from 4.7 per cent in April, to six per cent in May and seven per cent last month. But the annual rise in non-food costs - 0.2 per cent more expensive last month against at least 18 months of deflation - may be a more worrying sign of inflation, said economist Howard Archer.
“While shop prices continue to be pushed up primarily by high food prices, the Bank of England will also note that non-food prices edged up in June, which will lift concern that retailers are increasingly trying to pass on their elevated costs,” he said.
He added that the survey data reinforces expectations for a hold vote today, despite signs that the economy is slowing.
On Tuesday, the British Chambers of Commerce warned that the UK was on the brink of recession but with inflation far above target at 3.3 per cent, the Bank is thought to be restricted in its ability to cut rates.
The BRC’s survey showed that annual shop price inflation has increased five fold from 0.5 per cent seen in June 2007. Fresh food has seen the biggest price rises, at 8.4 per cent in June, the BRC said, with veal, beef, pork and oils, margarine and cooking fats seeing the largest increases.
So-called “ambient foods”, such as pasta, rice and flour have risen in price by 5.1 per cent year-on-year in June.
However, the BRC argued that shops are still holding back from passing on far greater input costs to consumers.
Stephen Robertson, director general of the BRC, said: “Despite annual increases of 60 and 80 per cent in world agricultural prices and oil respectively, UK food prices have only increased by seven per cent.
“Although their own costs are going up, food retailers are running high-profile price cuts and promotions. They are keeping prices to customers down by cutting costs and increasing sales.”
Record breaking oil prices have been driving production and distribution costs higher, but metal and commodity prices have also been rising fast.