Shop prices return to inflation as retailers struggle to shoulder costs

Shop price inflation increased to 0.4% year on year in June, compared with a decline of 0.1% in May, as retailers grappled with increases to minimum wage and employer national insurance costs.

Furthermore, non-food inflation increased to -1.2% year on year in June, against a decline of 1.5% in May. This was above the three-month average of -1.4%.

Food inflation also increased to 3.7% year on year in June, compared with a 2.8% in May, again above the three-month average of 3.1%.

As part of this, fresh food inflation increased to 3.2% year-on-year in June, against growth of 2.4% in May, while ambient food inflation increased to 4.3% year on year in June, against growth of 3.3% in May.

BRC CEO Helen Dickinson said: “Within three months of the costs imposed by last Autumn’s Budget kicking in, headline shop prices have returned to inflation for the first time in close to a year. Food inflation showed little sign of slowing down, particularly in fresh produce, where prices of meat have been impacted by high wholesale prices and more expensive labour costs.

“Meanwhile, fruit and vegetable prices increased due to the hot, dry weather reducing harvest yields. Non-food goods remained in deflation as retailers cut prices across product categories, especially DIY and gardening so customers could make the most of the sunshine.”

She added: “Retailers have warned of higher prices for consumers since last year’s Autumn Budget and the huge rises to Employer National Insurance costs and the National Living Wage. We predicted a significant rise in food inflation by the end of this year, and this has been accelerated by geopolitical tensions and impacts of climate change.

“To limit further rises, Government must find ways to alleviate the cost pressures bearing down on retailers. The upcoming business rates reform offers such an opportunity, and the Government must ensure no shop pays more as a result of the changes.”